FINANCIAL STATEMENTS WITH INDEPENDENT AUDITORS’ … · Adoptions of Governmental Accounting Standards Board Pronouncements As described in Note 1 to the financial statements, for

FINANCIAL STATEMENTS WITH INDEPENDENT AUDITORS’ REPORT

AND REPORTS ON INTERNAL CONTROL AND COMPLIANCE

YEAR ENDED JUNE 30, 2016

ZELENKOFSKE AXELROD LLC Jamison, Pennsylvania

DELAWARE RIVER BASIN COMMISSION YEAR ENDED JUNE 30, 2016

CONTENTS

Page Independent Auditors' Report 1 – 3 Management’s Discussion and Analysis 4 – 9 Financial Statements Government-wide Financial Statements Statement of Net Position 10 Statement of Activities 11 Funds Financial Statements Balance Sheet Governmental Funds 12 Statement of Revenues, Expenditures and Changes in Fund Balances Governmental Funds 13 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities 14 Statement of Net Position Proprietary Fund 15 Statement of Revenues, Expenses and Changes in Net Position Proprietary Fund 16 Statement of Cash Flows Proprietary Fund 17 Notes to Financial Statements 18 – 41 Required Supplemental Information Schedule of Revenues, Expenditures and Changes in Fund Balances Budget and Actual 43 – 44 Schedule of Commission’s Proportionate Share of the Net Pension Liability 45 Schedule of Commission’s Contributions 46 Statistical Section Unaudited Net Position (Deficit) by Component 48 Changes in Net Position 49 – 50 Fund Balances Governmental Funds 51 Changes in Fund Balances – Governmental Funds 52 Outstanding Debt by Type 53

DELAWARE RIVER BASIN COMMISSION


CONTENTS Page Supplemental Schedules Schedule of Active Special Projects for the Year Ended June 30, 2016 55 – 56 General Fund Expenditures – By Category and Object

for the Year Ended June 30, 2016 57 Schedule of Changes in Special Projects Advance/(Receivable) Balance 58 Single Audit Information Schedule of Expenditures of Federal and State Awards for the Year Ended June 30, 2016 59 Notes to Schedule of Expenditures of Federal and State Awards 60 Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 61 – 62 Report on Compliance for Each Major Program and on Internal Control Over

Compliance Required by OMB Circular A-133 and New Jersey OMB Circular 04-04 63 – 64 Schedule of Findings and Questioned Costs 65 Summary Schedule of Prior Audit Findings 66

INDEPENDENT AUDITORS' REPORT To the Commissioners Delaware River Basin Commission

Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities, the business-type activities, and each major fund of the Delaware River Basin Commission (“Commission”) as of and for the year ended at June 30, 2016 and 2015, and the related notes to the financial statements, which collectively comprise the Commission’s statements as listed in the table of contents.

Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the governmental activities, the business-type activities, and each major fund of the Commission at June 30, 2016 and 2015, and the respective changes in its financial position and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

To the Commissioners Delaware River Basin Commission Page 2

Adoptions of Governmental Accounting Standards Board Pronouncements

As described in Note 1 to the financial statements, for the year ended June 30, 2016 the Commission adopted the provisions of Governmental Accounting Standards No. 72, “Fair Value Measurement and Application,” the provisions of Statement No. 73, “Accounting and Financial Reporting for Pensions and Related Assets That Are Not within the Scope of GASB Statement 68, and Amendments to Certain Provisions of GASB Statements 67 and 68,” the provisions of Statement No. 76, “The Hierarchy of Generally Accepted Accounting Principles for State and Local Governments,” the provisions of Statement No. 79, “Certain External Investment Pools and Pool Participants”. Our opinions are not modified with respect to these matters.

Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis, schedule of revenues, expenditures and changes in fund balances budget and actual, schedule of commission’s contributions, and schedule of commission’s proportionate share of net pension liability on pages 4 through 9, 43 through 44, 45, 46 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the Commission’s basic financial statements. The accompanying required supplemental information and schedule of expenditures of federal and state awards, as required by Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards and New Jersey State Office of Management and Budget Circular Letter 04-04, Single Audit Policy for Recipients of Federal Grants, State Grants and State Aid are presented for purposes of additional analysis and are not a required part of the basic financial statements. The information included in the required supplemental information and schedule of expenditures of federal and state awards is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic

To the Commissioners Delaware River Basin Commission Page 3 financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the required supplemental information and schedule of expenditures of federal and state awards is fairly stated, in all material respects, in relation to the basic financial statements as a whole. The statistical section and supplemental schedules are presented for the purposes of additional analysis and are not a required part of the financial statements.

Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated January 20, 2017 on our consideration of the Commission’s internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Commission’s internal control over financial reporting and compliance.

ZELENKOFSKE AXELROD LLC

Jamison, Pennsylvania January 20, 2017

Page 4

DELAWARE RIVER BASIN COMMISSION MANAGEMENT’S DISCUSSION AND ANALYSIS

FOR FISCAL YEAR ENDING JUNE 30, 2016

Who We Are The Delaware River Basin Commission was formed in 1961 by compact agreement among the United States Government and the States of Delaware, New Jersey, New York and the Commonwealth of Pennsylvania (signatory parties) for the purpose of developing and implementing plans, policies and projects relating to the water resources of the Delaware River Basin. Commission programs include water quality protection, water supply allocation, regulatory review, water conservation initiatives, watershed planning, drought management, flood loss reduction and recreation.

Overview Our discussion and analysis provides an overview of the Commission’s financial activities for the fiscal year ending June 30, 2016. Please read it in conjunction with the Commission’s financial statements.

Financial Highlights

The Commission’s general fund net position is a deficit of $4,066,966 as of June 30, 2016, a decrease of $57,034.

The total cost of the Commission’s governmental programs and projects was $6,415,559.

The Commission’s business-type net position stands at $17,988,859 as of June 30 2016, an increase of $622,972.

Using This Annual Report This annual report consists of a series of financial statements. The Statement of Net Position (p. 10) and the Statement of Activities (p. 11) provide information about the activities of the Commission as a whole and present a long-term view of the Commission’s finances.

Fund financial statements start on page 12. These statements tell how governmental activities were financed in the short-term.

Reporting the Commission as a Whole The Statement of Net Position and the Statement of Activities- One of the most important questions asked about the Commission’s finances is, “Is the Commission better off or worse as a result of the year’s activities?” The Statement of Net Position and the Statement of Activities report information about the Commission in a way that helps answer this question. These statements include all assets and liabilities using the accrual basis of accounting, which is similar to the accounting used by most private-sector companies. All of the year’s revenues and expenses are taken into account regardless of when cash is received or paid.

These two statements report the Commission’s net position and changes in them. You can think of the Commission’s net position - the difference between assets and liabilities - as one way to measure the Commission’s financial health, or financial position. Over time the increases or decreases in the Commission’s net position are one indicator of whether its financial health is improving or deteriorating. The reader should consider other nonfinancial factors, however, such as the funding commitments of the States and Federal Government who contribute a significant portion of the funding for the Commission’s governmental activities.

Page 5

DELAWARE RIVER BASIN COMMISSION MANAGEMENT’S DISCUSSION AND ANALYSIS (CONTINUED)


All references to government-wide statements include both governmental activities and business-type activities. In the Statement of Net Position and the Statement of Activities, we divide the Commission into two kinds of activities: governmental and business-type.

Governmental activities-Most of the Commissions basic services are reported here including general government and administration, Water Resource Management, Science and Water Quality Management, Water Resource Operations and special projects. The signatory parties along with project-specific grants finance most of these activities.

Business-type activities-The Commission provides water storage in two federal facilities at Beltzville and Blue Marsh Lakes. The Commission has agreed to reimburse the federal government for the construction costs of these facilities. Costs associated with the operation, maintenance and debt service for these facilities as well as conservation, demand and administrative costs are reported here. The Commission has a fee structure that is applied to certain post-compact surface water users in the basin.

Reporting the Commission’s Most Significant Funds Fund Financial Statements The fund financial statements provide detailed information about the most significant funds-not the Commission as a whole. Some funds are required to be established by generally accepted accounting principles. However the Commission establishes some funds to help it control and manage money for particular purposes such as special projects or to show that it is meeting legal responsibilities for using certain grants and other money. The Commission’s two kinds of funds-governmental and proprietary-use different accounting approaches. Governmental funds-the Commission’s basic services are reported in governmental funds, which focus on how money flows into and out of those funds and the balances left at year-end available for spending. These funds are reported using an accounting method called modified accrual accounting, which measures cash and all other financial assets that can readily be converted to cash. The governmental fund statements provide a detailed short-term view of the Commission’s general government operations and the basic services it provides. Governmental fund information helps you determine whether there are more or fewer financial resources that can be spent in the near future to finance the Commission’s programs. We describe the relationship (or differences) between governmental activities (reported in the Statement of Net Position and the Statement of Activities) and governmental funds in a reconciliation schedule at the bottom of the fund financial statements. Proprietary funds-the Commission levies a fee on various entities in the basin for their consumptive and non-consumptive use of surface water. These revenues are reported in the proprietary fund. Costs associated with water storage facilities, water conservation and demand activities and related administrative activities are also reported in the proprietary fund. Proprietary funds are reported in the same way that all activities are reported in the Statement of Net Position and Statement of Activities. In fact the Commission’s proprietary fund is the same as the business-type activities we report in the government-wide statements but provides more detail and additional information, such as cash flows.

The Commission as a Whole As of June 30, 2016 the net positions of the governmental and business-type activities total ($3,588,275) and $17,988,859 respectively. A decrease of $10,176 in net position resulted from governmental activities and an increase of $622,972 in net position resulted from business activities for the fiscal year ending June 30, 2016.

Page 6



Net position is classified into three categories: unrestricted, restricted and invested in capital assets (net of related debt). For the year ending June 30, 2016 the government-wide investment in capital assets increased by $71,693. The increase in invested in capital assets is the difference between capitalized costs and depreciation charges during the fiscal year.

Governmental Activities For the fiscal year ending June 30, 2016, revenues, excluding inter-fund transfers, increased by $290,942 or approximately 7% from the prior fiscal year. General Fund revenues from the signatory parties were the same as the prior year. Project Review revenue was $839,249, higher by $240,620. Revenue from Special Projects was $1,946 less than the prior fiscal year. Details of this decrease are presented in the table below:

FY16 FY15 Change

310 USGS Monitoring 193,098$ 193,034$ 64$

314A Date Tracking-Haas Trust - 777 (777)

315 PA Protected Area 114,021 113,361 660

326B WPF-Software Tool, Planning Process 182,305 159,969 22,336

326C WPF-Exp Baseline Mon. 6,730 57,987 (51,257)

327A Nutrient Monitorg of Discharges 28,383 - 28,383

329A Consumptive Use Review - 8,617 (8,617)

343 Early Warning System 62,532 78,249 (15,717)

350A NG Monitoring-Haas Trust 14,473 37 14,436

353 PA State Water Plan 299 2,419 (2,120)

361 PADEP-PPL Ash Spill 3,939 - 3,939

362 Base-106 Base Grant 869,793 834,375 35,418

364 LDM Point Discharger Study - 25,086 (25,086)

375 NJ Flood Outreach 1,505 5,113 (3,608)

Grand Total 1,477,078$ 1,479,024$ (1,946)$

Project Name

The cost of all governmental activities this year was $6,415,599. The portion of this cost that was paid by signatory contributions was $1,933,500 with the balance of costs being funded by grants, fees, miscellaneous income and interfund transfers.

Business-Type Activities

For the fiscal year ending June 30, 2016, water sales revenues decreased $74,958, approximately 2%, to $3,482,420. Operating expenses were $1,350,951, up $432,741 mainly due to increased contractual services and increased maintenance expenses for the Blue Marsh reservoir. Net operating transfers out were $1,902,894, down $23,576 from fiscal 2015. Non-operating revenues were $394,397 up $371,937 from fiscal 2015 due to investment gains and income. These items are responsible for net income of $622,972 for the fiscal year ending June 30, 2016, $112,186 less than fiscal 2015.

Page 7



The Commission’s Funds

For the fiscal year ending June 30, 2016 the Commission’s governmental funds reported a combined total of $4,458,314 in fund balance, a decrease of $54,649 from fiscal 2015. This is $186,014 better than fiscal 2015 results. The unassigned fund balance at June 30, 2016 is $3,746,921, an increase of $81,281 over fiscal 2015. The following table compares the components of fund balance at June 30, 2016 and June 30, 2015:

FY16 FY15 Change

Committed for Early Retirement 300,000$ 300,000$ -$

Committed for Post-Employment Benefits 8,232 8,013 219

Assigned for Vacation and Compensatory Time 150,090 175,000 (24,910)

Assigned for Sick Pay 83,910 110,000 (26,090)

Assigned to Complete Special Projects 169,161 254,310 (85,149)

Unassigned 3,746,921 3,665,640 81,281

Total Fund Balance 4,458,314$ 4,512,963$ (54,649)$

Special project revenues were $1,477,078, $1,946 less than fiscal 2015. The 106, water pollution control grant had revenues of $869,793, $35,418 better than fiscal 2015.

General Fund Budgetary Highlights The budget for the fiscal year ending June 30, 2016 has not been amended since its original adoption. For fiscal 2016 the Commission reported a total unfavorable variance of $54,649. Notable revenue variances include an unfavorable variance of $715,000 in federal revenue, an unfavorable variance of $316,000 in revenue from the Commonwealth of Pennsylvania, a $439,249 favorable variance in revenue from project review fees and a favorable variance of $100,281 in other income, due to an insurance settlement. Overall there is an unfavorable revenue variance of $479,988 for fiscal 2016. Notable expense variances include favorable personal services and fringe benefits variances of $219,408 and $168,523 due to a management reorganization, delays in filling vacancies and lower than anticipated post-employment benefit expenses. The favorable variance in special and contractual services is due to lower than expected legal fees, under budget by $81,494 and lower than expected technical and scientific services, under budget by $14,130. The favorable expense variance in building and grounds of $150,799 is due to HVAC improvements that were not undertaken. Overall there is a favorable expense variance of $630,547. There is an unfavorable variance in transfers in of $3,582. Transfers out were $564,626, an unfavorable variance of $201,626. In total net transfers were worse than budget by $205,208.

Capital Asset and Debt Administration

Capital Assets As of June 30, 2016, the Commission reported $5,666,150 in capital assets net of depreciation. Capital assets include equipment, furniture, building, building improvements and the Commission’s share of construction costs for two federal water storage facilities: Beltzville Lake and Bluemarsh Lake.

Page 8



Debt As of June 30, 2016 the Commission had $21,391,145 in long-term debt outstanding. This can be broken down into five categories:

$10,583,426 for loans due to the Army Corps of Engineers for construction of water storage facilities

$9,001,635 as a net pension liability plus $924,360 in deferred inflows related to the pension liability (see footnote 7)

$388,099 due to the State of New Jersey for the early retirement program that was adopted September 25, 1991

$453,531 for employees accrued leave time

$40,094 for equipment leases

The Government Accounting Standards Board (GASB) has issued new statements that address accounting for other post-employment benefits (OPEB), such as retiree health insurance that will take effect June 30, 2017. When implemented, these statements may require the Commission to recognize the unfunded portion of its actuarially determined liability for retiree health insurance benefits. As of July 1, 2015, this liability was actuarially measured at $4,798,519.

Economic Conditions and Outlook Significant factors that have had and will continue to have an impact on the financial resources available to the Commission are the level of signatory party contributions, the liability for pension benefits and the liability for other post employment benefits. Signatory party contributions represent a major source of funding for the Commission’s governmental activities. The 100-year compact stipulates that the five signatory parties agree to support the Commission’s annual budget. The federal government adhered to this legislative obligation for 35 years, paying its fair share of the Commission’s annual operating budget. A major issue has been the elimination of the federal signatory contribution in 1997. Since then, the federal government has provided a signatory contribution to the Commission only for the federal fiscal year ending September 30, 2009. As of June 30, 2016 the cumulative federal shortfall totals $12.8 million. For the fiscal year ending June 30, 2016 the Commission did not receive a signatory contribution from the federal government. The Commission continues its efforts to restore and maintain federal funding. On December 14, 2016 the Commission adopted a comprehensive revision of its regulatory program fees, including an automatic annual indexed inflation adjustment for most fees, and an annual automatic inflation adjustment for its water supply charging rates, applicable to consumptive and non-consumptive surface water withdrawals. The new program fees will be effective January 1, 2017 and will provide a predictable annual revenue stream. For projects subject to regulatory review by both the DRBC and a basin state, the Commission has established a One Process/One Permit program to provide administrative agreement for the issuance of a single approval instrument, incorporating the applicable requirements of the two authorities. To implement the One Process/One Permit program, the Commission entered into administrative agreements with the States of New Jersey and New York in March 2015 and March 2016, respectively. The Commission had entered into administrative agreements with the State of Delaware and the Commonwealth of Pennsylvania in May 2013 and August 1976 respectively, that are not under the One Process/One Permit program.

Page 9



The Commission has promulgated draft rules and regulations associated with the development of natural gas in the Basin which, if adopted, will result in additional expenditures and revenues in future years. The factors outlined above will pose significant challenges to the Commission in future years.

Contacting the Commission

The financial report is designed to provide our customers, investors, and creditors with a general overview of the Commission’s finances and to demonstrate the Commission’s accountability for the money it receives. If you have questions about this report or need additional financial information, contact the Delaware River Basin Commission’s Director of Finance and Administration, P.O Box 7360, West Trenton, NJ 08628-0360.

Page 10

DELAWARE RIVER BASIN COMMISSION STATEMENT OF NET POSITION

JUNE 30, 2016 (WITH COMPARATIVE TOTALS AS OF JUNE 30, 2015)

Special Governmental Business-type June 30, June 30,

General Fund Projects Activities Activities 2016 2015

Assets:

Cash and Cash Equivalents 2,592,333$ 1,376,911$ 3,969,244$ 1,417,448$ 5,386,692$ 7,576,546$

Investments 1,999,730 - 1,999,730 22,490,843 24,490,573 21,158,904

OPEB Asset 8,232 - 8,232 8,232 8,013

Interest Receivable - - - - 121,864

Receivables (Net)

Due From Other Governments 173,250 338,782 512,032 512,032 177,989

Interfund Receivable - - - - 260,000

Interest - - - 111,790 111,790 -

Other - - - - - -

Water Sales - - - 839,000 839,000 838,640

Reimbursable Water Supply Storage Facility Costs - - - 60,224 60,224 75,040

Prepaid Expenses 81,683 3,000 84,683 84,683 35,166

Capital Assets (net) 859,089 478,691 1,337,780 4,328,370 5,666,150 6,053,232

Total Assets 5,714,317$ 2,197,384$ 7,911,701$ 29,247,675$ 37,159,376$ 36,305,394$

Deferred Outflows of Resources

Differences between expected and actual experiences 214,747 - 214,747 - 214,747 -

Changes in pension assumptions 966,704 - 966,704 - 966,704

Total Deferred Outflows of Resources 1,181,451$ -$ 1,181,451$ -$ 1,181,451$ -$

Liabilities and Net Position:

Accounts Payable 91,195$ 101,347$ 192,542$ 391,402$ 583,944$ 398,434$

Interfund Payable - - - - 260,000

Accrued Interest - - - 177,401 177,401 186,694

Employee Compensation and Benefits 14,708 - 14,708 14,708 94,355

Advances 171,011 1,602,033 1,773,044 1,773,044 903,673

Accrued Leave Time 428,552 15,313 443,865 9,666 453,531 450,700

Long Term Liabilities:

Early Retirement Program 291,178 - 291,178 96,921 388,099 439,251

Net Pension Liability 9,001,635 - 9,001,635 9,001,635 8,076,921

Lease Obligation 40,094 - 40,094 40,094 51,183

Due to US Army Corps of Engineers -

Due within one year - - - 498,409 498,409 481,971

Due in more than one year - - - 10,085,017 10,085,017 10,583,426

- -

Total Liabilities 10,038,373 1,718,693 11,757,066 11,258,816 23,015,882 21,926,608

Deferred Inflows of Resources

Difference between projected and actual investment earnings 144,729 - 144,729 - 144,729 481,341

Changes in Pension Proportions 779,631 - 779,631 - 779,631 363,639

Total Deferred Inflows of Resources 924,360 - 924,360 - 924,360 844,980

Net Position (Deficit)"

Invested in Capital Assets, Net of Related Debt 818,995 478,691 1,297,686 (6,255,056) (4,957,370) (5,063,348)

Restricted 8,232 - 8,232 - 8,232 8,013

Unrestricted (4,894,193) - (4,894,193) 24,243,915 19,349,722 18,843,123

Total Net Position (4,066,966)$ 478,691$ (3,588,275)$ 17,988,859$ 14,400,584$ 13,787,788$

Totals

(Memorandum Only)

Page 11

DELAWARE RIVER BASIN COMMISSION STATEMENT OF ACTIVITIES

JUNE 30, 2016 (WITH SUMMARIZED FINANCIAL INFORMATION

FOR THE YEAR ENDED JUNE 30, 2015)

Functions/Programs Expenses

Indirect Expenses

Allocation

Charges for

Services/Usage

Operating

Grants and

Contributions

Governmental

Activities

Business-type

Activities June 30, 2016 June 30, 2015

Primary government:

General government $ 2,585,242 $ (1,748,171) $ - $ - $ (837,071) $ - $ (837,071) $ (843,104)

Water Resource Management 1,159,005 528,974 839,249 - (848,730) - (848,730) (897,400)

Science and Water Quality Management 462,150 210,927 - - (673,077) - (673,077) (591,666)

Water Resource Operations 477,538 217,950 - - (695,488) - (695,488) (912,419)

Special projects 1,731,624 790,320 - 1,477,078 (1,044,866) - (1,044,866) (1,082,823)

Total Governmental Activities 6,415,559 - 839,249 1,477,078 (4,099,232) - (4,099,232) (4,327,412)

Business-Type Activities:

Water Supply Storage Facilities 1,720,829 - 3,482,420 - - 1,761,591 1,761,591 2,253,327

Total Primary Government $ 8,136,388 $ - $ 4,321,669 $ 1,477,078 $ (4,099,232) $ 1,761,591 $ (2,337,641) $ (2,074,085)

$ 1,933,500 $ - $ 1,933,500 $ 1,933,500

13,975 764,275 778,250 408,301

238,687 - 238,687 186,306

1,902,894 (1,902,894) - -

4,089,056 (1,138,619) 2,950,437 2,528,107

(10,176) 622,972 612,796 454,022

(3,578,099) 17,365,887 13,787,788 22,009,093

(8,675,327)

$ (3,588,275) $ 17,988,859 $ 14,400,584 $ 13,787,788

Transfers

Total general revenues and transfers

General revenues:

Grants and contributions not restricted to special programs

Program Revenues Net (Expense) Revenue and Change in Net Position

Investment earnings

Miscellaneous income

Change in net assets

Net Position-Beginning of Year

Net Position-Ending of Year

Cumulative Change

Page 12

DELAWARE RIVER BASIN COMMISSION GOVERNMENTAL FUNDS

BALANCE SHEET JUNE 30, 2016

(WITH COMPARATIVE TOTALS AS OF JUNE 30, 2015)

Special Projects June 30, June 30,

General Fund Fund 2016 2015

Assets:

Cash and Cash Equivalents 2,592,333$ 1,376,911$ 3,969,244$ 5,722,484$

Investments 1,999,730 - 1,999,730 -

OPEB Asset 8,232 - 8,232 8,013

Accounts Receivable 173,250 338,782 512,032 177,989

Interfund Receivable - - - 260,000

Prepaid Expenses 81,683 3,000 84,683 35,167

Total Assets 4,855,228$ 1,718,693$ 6,573,921$ 6,203,653$

Liabiltities and Fund Balances:

Liabilities

Accounts Payable 91,195$ 101,347$ 192,542$ 298,433$

Interfund Payable - - - 260,000

Employee Compensation and Benefits 14,708 - 14,708 94,355

Advances 171,011 1,602,033 1,773,044 903,673

Accrued Vacation and Sick Time 120,000 15,313 135,313 134,229

Total Liabilities 396,914 1,718,693 2,115,607 1,690,690

Fund Balances:

Committed:

Early Retirement 300,000 - 300,000 300,000

Retirement Benefits Fund 8,232 - 8,232 8,013

Assigned: -

Designated for Vacation and Compensatory Time 150,090 - 150,090 175,000

Designated for Sick Pay Retirement 83,910 - 83,910 110,000

Designated for Completion of Special Projects 169,161 - 169,161 254,310

Unassigned 3,746,921 - 3,746,921 3,665,640

Total Fund Balances 4,458,314 - 4,458,314 4,512,963

Total Liabilities and Fund Balances 4,855,228$ 1,718,693$

Total Net Position Reported for Governmental Activities in the Statement of

Net Position is Different Because:

Capital Assets used in Governmental Activities are Not Financial

Resources and Therefore are Not Reported in the Funds. 1,337,780 1,277,176

Long-Term Liabilities are Not Due and Payable in the Current Period

and Therefore are Not Reported in the Funds. (639,825) (700,319)

Change in Pension Assumptions 1,181,451 253,982

Net Pension Liability (9,001,635) (8,076,921)

Difference between projected and actual investment earnings (144,729) (481,341)

Change in Pension Proportions (779,631) (363,639)

Total Net Position of Governmental Activities (3,588,275)$ (3,578,099)$

Totals

(Memorandum Only)

Page 13


STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES FOR THE YEAR ENDED JUNE 30, 2016

(WITH COMPARATIVE TOTALS FOR YEAR ENDED JUNE 30, 2015)

Special Projects June 30, June 30,

General Fund Funds 2016 2015

Revenues

Signatory Party Contributions:

State of Delaware 447,000$ -$ 447,000$ 447,000$

State of New Jersey 693,000 1,505 694,505 698,113

State of New York 359,500 - 359,500 359,500

Commonwealth of Pennsylvania 434,000 114,320 548,320 549,780

Federal Government United States - 869,793 869,793 859,461

Sale of Publications 2,707 - 2,707 2,778

Project Review Fees 839,249 - 839,249 598,629

Investment Income 13,975 - 13,975 -

Fines, Assessments and Other Income 235,981 491,460 727,441 696,287

Total Revenues 3,025,412 1,477,078 4,502,490 4,211,548

Expenditures:

Personnel Services 2,487,892 473,538 2,961,430 3,011,603

Special and Contractual Services 123,266 900,727 1,023,993 955,814

Other Services 168,158 190 168,348 165,871

Supplies and Materials 37,262 20,921 58,183 47,237

Buildings and Grounds 191,701 44,860 236,561 202,329

Communications 27,383 7,365 34,748 26,274

Travel 52,912 6,253 59,165 61,060

Maintenance, Replacements, Acquisitions and Rentals 153,302 46,391 199,693 145,549

Fringe Benefits and Other Contributions 1,439,677 278,235 1,717,912 1,762,944

Total Expenditures 4,681,553 1,778,480 6,460,033 6,378,681

Excess of Expenditures Over Revenues (1,656,141) (301,402) (1,957,543) (2,167,133)

Other Financing Sources (Uses):

Operating Transfers In 2,166,118 627,873 2,793,991 2,262,609

Operating Transfers (Out) (564,626) (326,471) (891,097) (336,139)

Total Other Financing Sources - Net 1,601,492 301,402 1,902,894 1,926,470

Net Change in Fund Balances (54,649) - (54,649) (240,663)

Fund Balances-Beginning of Year 4,512,963 - 4,512,963 4,753,626

Fund Balances-End of Year 4,458,314$ -$ 4,458,314$ 4,512,963$

(Totals Memorandum Only)

Page 14


RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES OF THE GOVERNMENTAL FUNDS TO THE

STATEMENT OF ACTIVITIES YEAR ENDED JUNE 30, 2016 AND 2015

2016 2015

Net Change in Fund Balances - Governmental Funds (54,649)$ (240,663)$

The change in net assets reported for governmental activities

in the statement of activities is different because:

Governmental funds report capital outlays as expenditures. However,

in the statement of activities the cost of those assets is amortized over

their estimated useful lives and reported as depreciation expense.

This is the amount by which capital assets of $223,057 exceeds

depreciation $151,363 in the current period. 71,694 (56,407)

Repayment of compensated absences is an expenditure in the

governmental funds, but the repayment reduces long-term liabilities in

the statement of net position and is not reported in the statement of

activities. (1,748) (21,531)

Loss on disposal of assets is reported in the statement of activities but

excluded from governmental funds. - (14,091)

Repayment of the liability for early retirement is an expenditure in the

governmental funds but the repayment reduces long-term liabilities in the

statement of net position and is not reported in the statement of activities. 51,152 44,148

Change in Pension Expense (76,625) 7,408

Changes in Net Position of Governmental Activities (10,176)$ (281,136)$

Page 15

DELAWARE RIVER BASIN COMMISSION PROPRIETARY FUND

STATEMENT OF NET POSITION JUNE 30, 2016

(WITH COMPARATIVE TOTALS AS OF JUNE 30, 2015)

Business-Type

Activities

Enterprise Funds

Water Supply June 30, June 30,

Storage Facilities 2016 2015

Assets

Current Assets:

Cash and Cash Equivalents 1,417,448$ 1,417,448$ 1,854,062$

Investments 22,490,843 22,490,843 21,158,904

Other Interest Receivables 111,790 111,790 121,864

Water Sales Receivables (Net) 839,000 839,000 838,640

Reimbursable Water Supply Storage Facility Costs 60,224 60,224 75,040

Total Current Assets 24,919,305 24,919,305 24,048,510

Non Current Assets:

Land, Building and Improvements (Net) 4,308,414 4,308,414 4,729,900

Furniture and Equipment (Net) 19,956 19,956 46,156

Total Non Current Assets 4,328,370 4,328,370 4,776,056

Total Assets 29,247,675$ 29,247,675$ 28,824,566$

Liabilities and Net Position

Liabilities:

Current Liabilities:

Accounts Payable 391,402$ 391,402$ 100,001$

Interfund Payable - - -

Accrued Interest 177,401 177,401 186,694

Due To US Army Corps of Engineers 498,409 498,409 481,971

Total Current Liabilities 1,067,212 1,067,212 768,666

Non Current Liabilities:

Accrued Leave Time

Accrued Vacation and Sick Time 9,666 9,666 9,666

Early Retirement Program 96,921 96,921 96,921

Due To US Army Corps of Engineers 10,085,017 10,085,017 10,583,426

Total Non Current Liabilities 10,191,604 10,191,604 10,690,013

Total Liabilities 11,258,816 11,258,816 11,458,679

Net Position

Invested in Capital Assets, Net of Related Debt (6,255,056) (6,255,056) (6,289,341)

Unrestricted 24,243,915 24,243,915 23,655,228

Total Net Position 17,988,859 17,988,859 17,365,887

Total Liabilities and Net Position 29,247,675$ 29,247,675$ 28,824,566$

Totals

(Memorandum Only)

Page 16


STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION YEAR ENDED JUNE 30, 2016


Business-Type

Activities

Enterprise Funds


Storage Facility 2016 2015

Operating Revenue:

Charges for Services:

Water Sales 3,482,420$ 3,482,420$ 3,557,378$

Total Operating Revenue 3,482,420 3,482,420 3,557,378

Operating Expenses:

Special and Contractual Services 903,265 903,265 447,871

Legal Expense - - 6,818

Depreciation 447,686 447,686 463,521

Total Operating Expenses 1,350,951 1,350,951 918,210

Operating Income: 2,131,469 2,131,469 2,639,168

Nonoperating Revenues (Expenses):

Interest Income 532,767 532,767 562,024

Realized Gain on Sales of Investments (205,290) (205,290) 309,717

Net Increase in Fair Value of Investments 436,798 436,798 (463,440)

Interest Expense (369,878) (369,878) (385,841)

Total Nonoperating Revenues 394,397 394,397 22,460

Net Income Before Operating Transfers 2,525,866 2,525,866 2,661,628

Net Operating Transfers (Out) (1,902,894) (1,902,894) (1,926,470)

Change in Net Position 622,972 622,972 735,158

Total Net Position - Beginning of Year 17,365,887 17,365,887 16,630,729

Total Net Position - End of Year 17,988,859$ 17,988,859$ 17,365,887$

Totals

(Memorandum Only)

Page 17


STATEMENT OF CASH FLOWS FOR YEAR ENDED JUNE 30, 2016


Business-Type

Activities

Enterprise Funds


Storage Facilities 2016 2015

Cash Flows From Operating Activities:

Cash Received from Water Users 3,482,070$ 3,482,070$ 3,548,987$

Payments to Vendors and Suppliers (606,350) (606,350) (371,330)

Net Cash Provided from Operations 2,875,720 2,875,720 3,177,657

Cash Flows From Financing Activities:

Operating Transfers to Other Funds (1,902,894) (1,902,894) (1,926,470)

Net Cash Used in Noncapital and Related Financing Activities (1,902,894) (1,902,894) (1,926,470)

Cash Flows from Capital and Related Financing Activities:

Acquisition of Capital Assets - - (730)

Interest Paid (369,379) (369,379) (395,008)

Principal Received - - 14,321

Internal Balances - - -

Principal Paid (481,971) (481,971) (466,076)

Net Cash Used in Capital and Related Financing Activities (851,350) (851,350) (847,493)

Cash Flows from Investing Activities:

Interest Received 542,841 542,841 571,191

Sale (Purchase) of Investments, Net (1,100,931) (1,100,931) (844,632)

Net Cash Used in Investing Activities (558,090) (558,090) (273,441)

Net Increase/( Decrease) in Cash and Cash Equivalents (436,614) (436,614) 130,253

Cash and Cash Equivalents-Beginning of Year 1,854,062 1,854,062 1,723,809

Cash and Cash Equivalents-End of Year 1,417,448$ 1,417,448$ 1,854,062$

Reconciliation of Operating Income to Net Cash Provided by Operating Activities:

Operating income 2,131,469$ 2,131,469$ 2,639,168$

Adjustments to Reconcile Operating Income to Net Cash Provided by Operating Activities:

Depreciation and Net Amortization 447,686 447,686 463,521

Changes in Operating Assets and Liabilities: -

Decrease (Increase) in Accounts Receivable 14,816 14,816 (8,391)

Increase in Water Sales Receivable (360) (360) -

Increase in Accounts Payable 291,402 291,402 83,359

(Decrease) in Accounts Payable (9,293) (9,293) -

Total Adjustments 744,251 744,251 538,489

Net Cash Provided by Operating Activities 2,875,720$ 2,875,720$ 3,177,657$

Totals

(Memorandum Only)

Page 18

DELAWARE RIVER BASIN COMMISSION NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2016

NOTE 1: NATURE OF ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Entity

The Delaware River Basin Commission (the "Commission") was formed in 1961 by agreement among the U.S. Government and the States of Delaware, New Jersey, New York, and the Commonwealth of Pennsylvania, for the purpose of developing and implementing plans, policies, and projects relating to the water resources of the Delaware River Basin.

The accompanying financial statements of the Delaware River Basin Commission have been prepared in conformity with generally accepted accounting principles as prescribed by the Governmental Accounting Standards Board (GASB). In June 1999 the GASB issued Statement 34 Basic Financial Statements – and Management’s Discussion and Analysis – for State and Local Governments. This statement established new financial reporting requirements for state and local governmental entities throughout the United States. They require new information and restructure much of the information that governments have presented in the past. Comparability with reports issued in prior years is affected. The Commission has implemented these standards for the fiscal year ending June 30, 2004 and future periods. With the implementation of GASB Statement 34, the Commission has prepared required supplementary information titled Management’s Discussion and Analysis, which precedes the basic financial statements. The accompanying financial statements present the financial position of the Commission, the results of operations of the Commission and the various funds and fund types, and the cash flows of the proprietary funds. The financial statements are presented as of June 30, 2016 for the year then ended.

A) Reporting Entity

Government accounting principles require the financial reporting entity to include the primary government, organizations for which the primary government is financially accountable and other organizations, for which the nature and significance of their relationship with the primary government are such that exclusion would cause the reporting entity’s financial statements to be misleading or incomplete. Based on these criteria, the Commission has no component units and the reporting entity is composed solely of the primary government.

B) Government-Wide and Fund Financial Statements

The Government-wide financial statements (i.e., statement of net position, and the statement of activities) report information on all the non-fiduciary activities of the primary government. For the most part, the effect of interfund activity has been removed from these statements. Governmental activities, which normally are supported by signatory and intergovernmental revenues, are reported separately from business-type activities, which rely, to a significant extent, on fees and charges for support.

Page 19

DELAWARE RIVER BASIN COMMISSION NOTES TO FINANCIAL STATEMENTS (CONTINUED)

JUNE 30, 2016

NOTE 1: NATURE OF ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Nature of Entity (Continued) B) Government-Wide and Fund Financial Statements (Continued)

The Statement of Activities demonstrates the degree to which direct expenses of a given function or segment are financed by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include 1) charges to customers or applicants who purchase, use, or directly benefit form goods, services or privileges provided by a given function or segment and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Signatory revenues and other items not properly included among program revenues are reported instead as general revenues.

Separate financial statements are provided for governmental funds and the proprietary fund. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements.

C) Measurement Focus, Basis of Accounting and Financial Statement Presentation

The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as is the proprietary fund financial statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of the related cash flow. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. Amounts paid to acquire capital assets are capitalized as assets in the government-wide financial statements, rather than reported as an expenditure. Proceeds of long-term debt are recorded as liabilities in the government-wide financial statements, rather than as an other financing source. Amounts paid to reduce long-term indebtedness of the reporting government are reported as a reduction of the related liability, rather than as an expenditure. Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as they are both measurable and available. Revenues are considered to be available when they are collected within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the Commission considers revenues to be available if they are collected within 365 days of the end of the current fiscal period. Expenditures generally are recorded when a liability is incurred except debt service and net pension liability, as under accrual accounting. Signatory revenues, operating grants, capital grants, and interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. All other revenue items are considered to be measurable only when the Commission receives cash.

Page 20


JUNE 30, 2016

NOTE 1: NATURE OF ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING

POLICIES (CONTINUED)

C) Measurement Focus, Basis of Accounting, and Financial Statement Presentation (Continued) Under the current financial resources measurement focus, only current assets and current liabilities are generally included on the balance sheet. The reported fund balance is considered to be a measure of “available spendable resources”. Governmental funds operating statements present increases (revenues and other financing sources) and decreases (expenditures and other financing uses) in net current assets. Accordingly, they are said to present a summary of sources and uses of “available spendable resources” during a period. Because of their spending measurement focus, expenditure recognition for governmental fund types exclude amounts represented by noncurrent liabilities. Since they do not affect net current assets, such long-term amounts are not recognized as governmental fund type expenditures or fund liabilities. Amounts expended to acquire capital assets are recorded as expenditures in the year that resources were expended, rather than as fund assets. The proceeds of long-term debt are recorded as an other financing source rather than as a fund liability. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due. The Commission reports the following governmental funds:

The General Fund is the primary government's primary operating fund. It accounts for all financial resources of the general government, except those required to be accounted for in another fund. Revenues of this fund are primarily derived from signatory revenues, state and federal grants, fees for services. Many of the basic activities of the Commission are accounted for in this fund, including the daily operations of the Commission.

The Special Projects Fund is used to account for specific revenue sources related to the provisions imposed by outside agencies or the Commission for services that are restricted to expenditures for those specified purposes.

The Commission’s Enterprise Fund is a proprietary fund. In the fund financial statements, proprietary funds are presented using the accrual basis of accounting. Revenues are recognized when they are earned and expenses are recognized when the related goods or services are delivered. In the fund financial statements, proprietary funds are presented using the economic resources measurement focus. This means that all assets and all liabilities (whether current or noncurrent) associated with their activity are included on their balance sheets. Proprietary fund type operating statements present increases (revenues) and decreases (expenses) in total net assets.

Page 21


JUNE 30, 2016


C) Measurement Focus, Basis of Accounting, and Financial Statement Presentation

(Continued) Proprietary fund operating revenues, such as charges for services, result from exchange transactions associated with the principal activity of the fund. Exchange transactions are those in which each party receives and gives up essentially equal values. Non-operating revenues, such as subsidies and investment earnings, result from nonexchange transactions or ancillary activities.

Amounts paid to acquire capital assets are capitalized as assets in the fund financial statements, rather than reported as an expenditure. Proceeds of long-term debt are recorded as a liability in the fund financial statements, rather than as an other financing source. Amounts paid to reduce long-term indebtedness are reported as a reduction of the related liabilities, rather than an expense.

Private-sector standards of accounting and financial reporting issued prior to December 31, 1989, generally are followed in both the government-wide and proprietary fund financial statements to the extent that those standards do not conflict with or contradict guidance of the GASB. Based on the accounting and reporting standards set forth in GASB Statement No. 20, Accounting and Financial Reporting for Proprietary Funds and Other Governmental Entities that use Proprietary Fund Accounting, the Commission has opted to apply only the accounting and reporting pronouncements issued by the Financial Accounting Standards Board (FASB) on or before November 30, 1989 for business-type activities and enterprise funds.

The Commission reports the following major proprietary fund:

The Water Supply Storage Facilities Fund is used to account for the operations of the Water Storage Facility that is financed and operated in a manner similar to private business enterprises-where the intent of the governing body is that costs of providing services to the general public on a continuing basis be financed or recovered primarily through user charges and cost reimbursement plans.

When both restricted and unrestricted resources are available for use, it is the Commission's policy to use unrestricted resources first, then restricted resources as they are needed for their intended purposes.

D) Assets, Liabilities, and Net Assets or Equity 1. Cash and Cash Equivalents For purposes of the accompanying statement of cash flows, the Commission

considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents.

Page 22


JUNE 30, 2016


D) Assets, Liabilities, and Net Assets or Equity (Continued) 2. Receivables and Payables

Interfund Receivables and Payables

Activity between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as "due to/from other funds." Any residual balances outstanding between the governmental activities and business-type activities are reported in the government-wide financial statements as "inter-fund receivable/payable."

3. Investments

Investments are reported at fair value based on quoted market prices. 4. Capital Assets

Capital assets, which include property, plant and equipment and infrastructure assets, are reported in the applicable governmental or business-type activity columns in the government-wide financial statements. Property, plant and equipment and infrastructure with initial, individual costs that equal or exceed $500 and estimated useful lives of over one year are recorded as capital assets. Capital assets are recorded at historical costs or estimated historical costs if purchased or constructed. Donated capital assets are recorded at estimated fair value at the date of donation.

The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend its useful life are not capitalized.

Major outlay of capital assets and improvements are capitalized as projects are completed. Interest incurred during the construction phase of the capital asset of business-type activities is included as part of the capitalized value of the assets constructed. Property, plant and equipment of the primary government are depreciated using the straight line method over the following intended useful lives:

Asset Years

Buildings and Improvements 40 to 60

Machinery and Equipment 3 to 20

Water Supply Storage Facilities 50 5. Allowance for Doubtful Accounts Accounts receivable have been reported net of allowance for doubtful accounts.

Page 23


JUNE 30, 2016

NOTE 1: NATURE OF ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) D) Assets, Liabilities, and Net Assets or Equity

6. Accrued Vacation and Sick Time The Commission had a liability of $453,531 representing vacation and sick time earned by employees as of June 30, 2016. Of this amount, $443,865 is reported as a liability of Governmental activities and $9,666 is shown as a liability of Business-type activities. In the government funds – balance sheet, liabilities of $120,000 and $15,313 were reflected in the General Fund and Special Projects Fund, respectively. There is also designated equity of $234,000 for paid leave in the General Fund. In the Proprietary Fund Type Statements of Net Assets, a liability of $9,666 is reflected for its portion of accrued vacation and sick time. 7. Long-Term Obligations In the government-wide financial statements and proprietary fund type financial statements, long-term debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business-type activities, or proprietary fund type Statement of Net Assets. 8. Advances Advances reported in government-wide financial statements represent unearned revenues. The advances will be recognized as revenue in the fiscal year they are earned in accordance with the accrual basis of accounting. Advances reported in governmental fund financial statements represent unearned revenues or revenues which are measurable but not available and, in accordance with the modified accrual basis of accounting, are reported as advances. The Commission deems revenue received within 365 days of the year end to be available. 9. Net Assets/Fund Balances The government-wide and business-type activities fund financial statements utilize a net position presentation, classified as follows:

Invested In Capital Assets, Net of Related Debt – This category groups all capital assets, including infrastructure, into one component of net assets. Accumulated depreciation and the outstanding balances of debt that are attributable to the acquisition, construction or improvement of these assets reduce the balance in this category.

Restricted Net Position – This category presents external restrictions imposed by creditors, grantors, contributors or laws or regulations of other governments and restrictions imposed by law through constitutional provisions or enabling legislation.

Unrestricted Net Position – This category represents net assets of the Commission, not restricted for any project or other purpose.

Page 24


JUNE 30, 2016


D) Assets, Liabilities, and Net Assets or Equity (Continued)

9. Net Assets/Fund Balances (Continued) The Commission has established a policy of classifying fund balances in accordance with GASB #54 as follows:

Committed Fund Balance – amounts constrained to specific purposes by the Commission itself, using the highest level of decision-making authority. To be reported as committed, amounts cannot be used for any other purpose unless the Commission takes the highest level action to remove or change the constraint. Presently amounts are committed for early retirement and post-employment health insurance that are actuarially determined.

Assigned Fund Balance – amounts the Commission intends to use for a specific purpose. Presently amounts are assigned for sick and vacation compensation and for completion of special projects.

Unassigned Fund Balance – amounts that are available for any purpose. These amounts are reported only in the general fund.

The management of the Commission has the authority to express intended use of resources of resources in the assignment of fund balance, whereas a Commission resolution is required to express intended use of resources that results in a commitment of fund balance. 10. Interfund Transactions

Quasi external transactions are accounted for as revenue, expenditures, or expenses. Transactions that constitute reimbursements to a fund for expenditures/expenses initially made from it that are properly applicable to another fund, are recorded as expenditures/expenses in the reimbursing fund and as a reduction of expenditures/expenses in the fund that is reimbursed. All other interfund transactions, except quasi external transactions and reimbursements, are recorded as transfers. 11. Deferred Inflows/Outflows of Resources

The Statements of Net Position report separate sections for deferred outflows and deferred inflows of resources. These separate financial statement elements represent a consumption or acquisition of net position that applies to a future period(s) and so will not be recognized as an outflow or inflow of resources (expense/revenue) until then. The Commission has one item that qualifies for reporting in these categories: deferred outflows and inflows related to pensions.

Page 25


JUNE 30, 2016


D) Assets, Liabilities, and Net Assets or Equity (Continued) 11. Deferred Inflows/Outflows of Resources (Continued)

Deferred outflows and inflows of resources related to pensions are described further in Note 7. The components of deferred outflows of resources are amortized into pension expense over a 6.44 year closed period, which reflects the weighted average remaining service life of all State of New Jersey Public Employees’ Retirement System (PERS) members beginning the year in which the deferred amount occurs (current year). The components of deferred inflows, the annual difference between the projected and actual earnings on PERS investments, are amortized over a five-year closed period beginning the year in which the difference occurs (current year).

12. Pensions For purposes of measuring net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the PERS and additions to/deductions from PERS’s fiduciary net position have been determined on the same basis as they are reported by PERS. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with benefit terms. Investments are reported at fair value.

13. Accounting Estimates

The preparation of the financial statements in conformity with accounting principles generally accepted in the United Sates of America require management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results may differ from those estimated.

14. Adoption of Governmental Accounting Standards Board (GASB) Statements

The Commission adopted the provisions of GASB’s Statement No. 72, “Fair Value Measurement and Application.” The adoption of this statement had no effect on previously reported amounts. The Commission adopted the provisions of GASB’s Statement No. 73, “Accounting and Financial Reporting for Pensions and Related Assets That Are Not within the Scope of GASB Statement 68, and Amendments to Certain Provisions of GASB Statements 67 and 68.” The adoption of this statement had no effect on previously reported amounts. The Commission adopted the provisions of GASB’s Statement No. 76, “The Hierarchy of Generally Accepted Accounting Principles for State and Local Governments.” The adoption of this statement had no effect on previously reported amounts.

The Commission adopted the provisions of GASB’s Statement No. 79, “Certain External Investment Pools and Pool Participants.” The adoption of this statement had no effect on previously reported amounts.

Page 26


JUNE 30, 2016


D) Assets, Liabilities, and Net Assets or Equity (Continued)

15. Pending Governmental Accounting Standards Board (GASB) Statements

The Government Accounting Standards Board has issued GASB’s Statement No. 74, “Financial Reporting for Postemployment Benefit Plans other than Pension Plans.” This statement is required to be adopted by the Commission for the year ending June 30, 2017. The Commission has not determined the effect of GASB’s Statement No. 74 on the financial statements. The Government Accounting Standards Board has issued GASB’s Statement No. 75, “Accounting and Financial Reporting for Postemployment Benefits Other Than Pensions.” This statement is required to be adopted by the Commission for the year ending June 30, 2018. The Commission has not determined the effect of GASB’s Statement No. 75 on the financial statements. The Government Accounting Standards Board has issued GASB’s Statement No. 77, “Tax Abatement Disclosures.” This statement is required to be adopted by the Commission for the year ending June 30, 2017. The Commission has not determined the effect of GASB’s Statement No. 77 on the financial statements. The Government Accounting Standards Board has issued GASB’s Statement No. 78, “Pensions Provided through Certain Multiple-Employer Defined Benefit Pension Plans” This statement is required to be adopted by the Commission for the year ending June 30, 2017. The Commission has not determined the effect of GASB’s Statement No. 78 on the financial statements. The Government Accounting Standards Board has issued GASB’s Statement No. 80, “Blending Requirements for Certain Component Units – an amendment of GASB Statement No. 14” This statement is required to be adopted by the Commission for the year ending June 30, 2017. The Commission has not determined the effect of GASB’s Statement No. 80 on the financial statements.

The Government Accounting Standards Board has issued GASB’s Statement No. 81, “Irrevocable Split-Interest Agreements” This statement is required to be adopted by the Commission for the year ending June 30, 2018. The Commission has not determined the effect of GASB’s Statement No. 81 on the financial statements. The Government Accounting Standards Board has issued GASB’s Statement No. 82, “Pension Issues – an amendment of GASB Statements No. 67, No. 68 and No. 73” This statement is required to be adopted by the Commission for the year ending June 30, 2018. The Commission has not determined the effect of GASB’s Statement No. 82 on the financial statements.

Page 27


JUNE 30, 2016

NOTE 2: BUDGETS

The Commission’s funds are under formal budgetary control as required by management of the Commission. The budget reflected in the financial statements was prepared generally on the same basis used to account for actual results and consists of those amounts contained in the formal budget, as approved and amended by the Delaware River Basin Board of Commissioners.

NOTE 3: CASH, CASH EQUIVALENTS, AND INVESTMENTS

The Commission has a written investment policy for the General Fund, Special Projects Fund and the Water Supply Storage Facilities Fund and Integral Part Trust (for OPEBs). The policy provides guidance on the scope, general objectives, standards of care, safekeeping and custody, suitable and authorized investments, investment parameters, reporting and policy considerations, prohibited types of transactions and collateralization. The policy provides for the General and Special Projects Funds the following authorized investments:

A) U.S. government obligations, U.S. government agency obligations, and U.S. government instrumentality obligations, which have a liquid market with a readily determinable market value;

B) Certificates of deposit and other evidences of deposit at financial institutions, bankers’ acceptances, and commercial paper, rated in the highest tier (e.g., A-1, P-1, F-1 or D-1).

C) Investment grade obligations of the Compact Signatories;

D) Local government investment pools, either state administered or administered

through joint power statutes and other intergovernmental agreement legislation. The policy provides for the Water Supply Storage Facilities Fund that the target asset allocation will be 30% (+/-5%) allocated to equities and 70% (+/-5%) to fixed income securities and money market investments and that the portfolio should be rebalanced to fall within the investment target at a minimum of every six (6) months.

Additionally, the Commissioners have authorized the Executive Director to utilize the services of professional asset managers. The Commission has retained the firms of Sterling Advisors and Wilmington Trust Investment Management, LLC. These firms are currently managing the assets of the Water Supply Storage Facilities Fund that are in the Commission’s name and in the custody of Susquehanna Trust & Investment Company and Wilmington Trust Company respectively, consistent with the Commission’s investment policy.

Page 28


JUNE 30, 2016

NOTE 3: CASH, CASH EQUIVALENTS, AND INVESTMENTS (CONTINUED) The following table shows the cash and investments of the Commission as of June 30, 2016 at fair market value:

Water Supply

Special Projects Storage Facilities

General Fund Fund Fund Totals

Cash and Cash Equivalents:

Cash on Hand 400$ -$ -$ 400$

Cash - Wells Fargo Bank 371,192 332,875 819,163 1,523,230

Cash Equivalents - New Jersey Cash Management Fund 2,220,741 1,044,036 6,268 3,271,045

Cash Equivalents - Susquehanna Trust & Investment Company - - 256,302 256,302

Cash Equivalents - Wilmington Trust Company - - 335,715 335,715

Total Cash and Cash Equivalents 2,592,333$ 1,376,911$ 1,417,448$ 5,386,692$

Investments:

Federal Obligations - Wells Fargo Investments 1,999,730$ -$ -$ 1,999,730$

Federal Obligations - Branch Bank & Trust Company - - 207,514 207,514

Corporate Obligations - Branch Bank & Trust Company - - 6,226,613 6,226,613

Municipal Obligations - Branch Bank & Trust Company - - 1,357,802 1,357,802

Equities - Branch Bank & Trust Company - - 3,386,691 3,386,691

Subtotal Susquehanna Trust & Investment Company - - 11,178,620 11,178,620

Federal Obligations - Wilmington Trust Company - - 4,290,438 4,290,438

Corporate Obligations - Wilmington Trust Company - - 3,254,090 3,254,090

Equities - Wilmington Trust Company - - 3,767,695 3,767,695

Subtotal Wilmington Trust Company - - 11,312,223 11,312,223

Total Investments 1,999,730 - 22,490,843 24,490,573

Total Cash, Cash Equivalents and Investments 4,592,063$ 1,376,911$ 23,908,291$ 29,877,265$

Cash held at Wells Fargo Bank was in the name of the Commission and secured by a tri-party collateralization agreement. The collateral is held by the Bank of New York and is not in the Commission’s name. The New Jersey Cash Management Fund is a pooled fund managed by the State of New Jersey, and is neither insured by a third party or collateralized. Branch Bank & Trust Company cash equivalents are invested in a short-term Federal Government obligations fund. Wilmington Trust Company cash equivalents are invested in a short-term fund comprised of both federal and corporate securities of the highest rating.

Page 29


JUNE 30, 2016

NOTE 3: CASH, CASH EQUIVALENTS, AND INVESTMENTS (CONTINUED) The following table shows the fair value of federal, state, municipal and corporate obligations held by maturity range of June 30, 2016:

Municipal Corporate Federal

Obligations Obligations Obligations Total

Maturity:

Less than 1 year -$ 363,945$ 1,049,485$ 1,413,430$

1 to 5 years 1,035,764 5,515,761 3,997,995 10,549,520

5 to 10 years 322,038 3,382,564 1,450,202 5,154,804

10 to 15 years - 218,433 - 218,433

Totals 1,357,802$ 9,480,703$ 6,497,682$ 17,336,187$

The following table displays the fair value of corporate obligations, by Standard & Poor rating as of June 30, 2016:

A 2,348,452$

A- 1,291,222

A+ 997,110

A1 141,419

A2 259,926

A3 599,582

AA- 907,299

AA1 20,354

AA2 142,609

AA3 143,333

BAA1 826,474

BAA2 809,903

BAA3 260,307

BBB+ 732,713

Totals 9,480,703$

Corporate Obligations

Equity Investments held by Branch Bank & Trust Company (for the Commission’s account with Sterling Advisors), Wilmington Trust Company (for the Commission’s account with Wilmington Trust Investment Management Company, LLC) and ICMA RC are unsecured and subject to market risk.

Page 30


JUNE 30, 2016

NOTE 3: CASH, CASH EQUIVALENTS, AND INVESTMENTS (CONTINUED) Investment Interest Rate Risks – Interest rate risk is the risk that the value of the Commission’s Investments in debt obligations will decline due to changes in interest rates. The Commission’s investment policy seeks to minimize interest rate risk by:

a) Structuring the investment portfolio so that securities mature to meet cash requirements for ongoing operations, thereby avoiding the need to sell securities on the open market prior to maturity.

b) Investing operating funds primarily in shorter-term securities, money market mutual funds, or similar investments pools.

Custodial Credit Risk – Deposits are exposed to custodial credit risk if they are not covered by depositary insurance and the deposits are uncollateralized. The Commission’s investment policy seeks to minimize custodial credit risk by:

a) Limiting investments to the safest types of securities.

b) Pre-qualifying the financial institutions, brokers/dealers, intermediaries and

advisers with which the Commission will do business.

c) Diversifying the investment portfolio so that potential losses on individual securities will be minimized.

The Commission maintains several bank accounts at Wells Fargo Bank. These accounts are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000. Additionally, these accounts are secured by a $2,000,000 tri-party collateralization agreement. At no time during the year did the combined total of all bank accounts held at Wells Fargo Bank exceed the sum total of the FDIC insurance required collateralization. In addition, as noted above, deposits with Wells Fargo Bank are secured by a tri-party collateral agreement. Concentration of Credit Risk – The Commission’s investment policy seeks to limit the concentration of credit risk through diversification by:

a) Limiting investments to avoid over-concentration in securities from a specific issuer (excluding U.S. Treasury securities).

b) Limiting investment in securities that have high credit risks.

As of June 30, 2016, the Commission does not have an investment in any one issuer that represents 5% or more of its net assets, excluding investments issued or explicitly guaranteed by the U.S. government, investments in mutual funds, external investment pool and other pooled investments.

Page 31


JUNE 30, 2016

NOTE 4: CAPITAL ASSETS

Beginning Ending

Balance Increases Decreases Balance

Governmental Activities:

Capital Assets Not Being Depreciated:

Land 1$ -$ -$ 1$

Total Capital Assets Not Being Depreciated: 1$ -$ -$ 1$

Capital Assets Being Depreciated:

Building & Improvements 2,225,421$ 53,415$ 2,278,836$

Furniture & Equipment 1,309,357 158,552 - 1,467,909

Total Capital Assets Being Depreciated 3,534,778 211,967 - 3,746,745

Less: Accumulated Depreciation for:

Building & Improvements (1,178,835) (58,840) - (1,237,675)

Furniture & Equipment (1,078,768) (92,523) - (1,171,291)

Total Accumulated Depreciation (2,257,603) (151,363) - (2,408,966)

Total Capital Assets Being Depreciated, Net 1,277,175 60,604 - 1,337,779

Governmental Activities Capital Assets, Net 1,277,176$ 60,604$ -$ 1,337,780$

Water Supply Storage Facilities:

Capital Assets Being Depreciated:

Water Supply Storage Facilities 21,074,316$ -$ -$ 21,074,316$

Furniture & Equipment 147,868 - - 147,868

Total Capital Assets Being Depreciated 21,222,184 - - 21,222,184

Less: Accumulated Depreciation for:

Water Supply Storage Facilities (16,344,416) (421,486) - (16,765,902)

Furniture & Equipment (101,712) (26,200) - (127,912)

Total Accumulated Depreciation (16,446,128) (447,686) - (16,893,814)

Business-Type Capital Assets Being

Depreciated Net 4,776,056$ (447,686)$ -$ 4,328,370$

Depreciation expense was charged to functions/programs of the Commission as follows:

Beginning Ending

Balance Increases Decreases Balance


General Government 2,043,128$ 112,362$ -$ 2,155,490$

Special Projects 214,475 39,001 - 253,476

Total Depreciation Expense -

Governmental Activities 2,257,603 151,363 - 2,408,966 Business-Type Activities:

Water Supply Storage Facilities 16,446,128 447,686 - 16,893,814

Total Depreciation Expense -

Business-Type Activities 16,446,128$ 447,686$ -$ 16,893,814$

Page 32


JUNE 30, 2016

NOTE 5: REIMBURSABLE WATER SUPPLY STORAGE FACILITY COSTS

The financial statements reflect a receivable from Western Berks Water Authority for construction costs financed by the Commission for a specific outlet pipe in the Blue Marsh Water Supply Storage Project. Principal and interest payments are due quarterly in the amount of $4,353.80 in January, April, July, and October at an interest rate of 3.463%. Repayment terms as of June 30, 2016, require the following principal and interest payments:

Fiscal Years

Ending

June 30 Principal Interest Total

2017 15,329$ 2,086$ 17,415$

2018 15,861 1,554 17,415

2019 16,410 1,005 17,415

Thereafter 12,624 438 13,062

Total 60,224$ 5,083$ 65,307$

NOTE 6: LONG-TERM LIABILITIES

Amount Due to U.S. Army Corps of Engineers

The Commission has agreed to reimburse the U.S. Army Corps of Engineers for costs related to the construction of the water supply storage facilities at the Beltzville and Blue Marsh Water Supply Storage projects. Repayment of the Beltzville project's cost requires annual payments of $253,499 continuing through 2030. Repayment of the Blue Marsh Project requires annual payments of $607,643 through 2028, and thereafter $309,118 annually through 2038. These payments include interest at an average rate of approximately 3%. Interest expense is recognized over the terms of the obligations. The Commission is responsible for a yearly pro rata share of operational, maintenance, and replacement costs of these projects. Interest expense for the year ended June 30, 2016, was $369,878. Water sales revenue and interest income are used to pay operating expenses and debt service.

Page 33


JUNE 30, 2016

NOTE 6: LONG-TERM LIABILITIES (CONTINUED)

A summary of changes in long-term liability obligations is as follows:

Beginning Ending Amounts Due

Balance Additions Reductions Balance Within One Year


Other Liabilities

Compensated Absences 441,034$ -$ 2,831$ 443,865$ 120,000$

Early Retirement 342,330 - (51,152) 291,178 70,188

Total Other Liabilities 783,364 - (48,321) 735,043 190,188

Governmental Activities Long-Term

Liabilities 783,364$ -$ (48,321)$ 735,043$ 190,188$

Beginning Ending Amounts Due

Balance Additions Reductions Balance Within One Year


Bonds and Notes Payable:

Due to Army Corps of Engineers 11,065,397$ -$ (481,971)$ 10,583,426$ 498,409$

Total Bonds and Notes Payable 11,065,397 - (481,971) 10,583,426 498,409

Other Liabilities:

Compensated Absences 9,666 - - 9,666 -

Early Retirement 96,921 - - 96,921 -

Total Other Liabilities 106,587 - - 106,587 -

Business-Type Activities Long-Term

Liabilities 11,171,984$ -$ (481,971)$ 10,690,013$ 498,409$

An analysis of debt service requirements to maturity on these obligations follows (with the exception of compensated absences):

Fiscal Years Total Debt

Ending Principal Interest Service

June 30 Requirements Requirements Requirements

2017 498,409$ 362,734$ 861,143$

2018 515,407 345,735 861,142

2019 532,987 328,155 861,142

2020 551,167 309,975 861,142

2021 569,968 291,174 861,142

2022 - 2026 3,155,123 1,150,588 4,305,711

2027 - 2031 2,870,391 584,748 3,455,139

2032 - 2036 1,302,761 242,828 1,545,589

2037 - 2038 587,213 31,023 618,236

10,583,426$ 3,646,960$ 14,230,386$

Page 34


JUNE 30, 2016

NOTE 7: EMPLOYEE RETIREMENT PLAN

General Information about the Pension Plan The Commission participates in the State of New Jersey Public Employees’ Retirement System (PERS), a cost-sharing, multi-employer, contributory, defined-benefit plan administered by the State of New Jersey, Division of Pensions and Benefits (the Division). For additional information about PERS, please refer to the Division’s Comprehensive Annual Financial Report (CAFR) which can be found at www.state.nj.us/treasury/pensions/annrprts.shtml. Pension vesting and benefit provisions are set by N.J.S.A. 43:15A. PERS provides retirement, death and disability benefits. All benefits vest after ten years of service, except for medical benefits described in note 8. The following represents the membership tiers for PERS: Tier Definition 1 Members who were enrolled prior to July 1, 2007. 2 Members who were eligible to enroll on or after July 1, 2007 and prior to

November 2, 2008. 3 Members who were eligible to enroll on or after November 2, 2008 and prior to

May 22, 2010. 4 Members who were eligible to enroll on or after May 22, 2010 and prior to June

28, 2011. 5 Members who were eligible to enroll on or after June 28, 2011. The contribution policy is set by N.J.S.A.43:15A, Chapter 62, P.L. 1994, and Chapter 115, P.L. 1997, and requires contributions by active members and contributing employers. Plan members and employer contributions may be amended by State of New Jersey legislation. During the fiscal year ending June 30, 2016, members contributed at a uniform rate of 7.06% of base salary; Member contributions will continue to increase each year on July 1 until the final increase on July 1, 2018 when a contribution rate of 7.5% is reached. Employer contributions are actuarially determined by PERS. The Commission’s contribution requirements for the years ended June 30, 2016, 2015, and 2014 were $344,752, $355,637 and $342,020. Contact information for PERS is as follows: State of New Jersey Department of the Treasury Division of Pensions & Benefits P.O. Box 295 Trenton, New Jersey 08625-0295 (609) 292-7524

Page 35


JUNE 30, 2016

NOTE 7: EMPLOYEE RETIREMENT PLAN (CONTINUED) Benefits Provided Service retirement benefits of 1/55th of final average salary for each year of service credit is available to tiers 1 and 2 members upon reaching the age of 60 and to tier 3 members upon reaching age 62. Service retirement benefits of 1/60th of final average salary for each year of service credit is available to tier 4 members upon reaching age 62 and tier 5 members upon reaching age 65. Early retirement benefits are available to tiers 1 and 2 members before reaching age 60, tiers 3 and 4 before age 62 with 25 or more years of service credit and tier 5 with 30 or more years of service credit before age 65. Benefits are reduced by a fraction of a percent for each month that a member retires prior to the age at which a member can receive full early retirement benefits in accordance with their respective tier. Tier 1 members can receive an unreduced benefit from age 55 to age 60 if they have at least 25 years of service. Deferred retirement is available to members who have at least 10 years of service credit and have not reached the service retirement age of their respective tier. Pension Liabilities, Pension Expense, and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions For the fiscal year ending June 30, 2015 the Commission implemented Governmental Accounting Standards Board Statement No. 68, Accounting and Financial Reporting for Pensions (GASB 68).GASB 68 requires participating employers in PERS to recognize their proportionate share of the collective net pension liability, collective deferred outflows of resources, collective deferred inflows of resources and collective pension expense excluding that attributable to member contributions. The employer allocation percentages are based on the ratio of the Commission’s contributions as an individual employer to total contributions to the PERS during the measurement period July 1, 2014 through June 30, 2015. At June 30, 2016, the Commission reported a liability of $9,001,635 for its proportionate share of the net pension liability. The net liability was measured as of June 30, 2015 and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of that date. The Commission’s proportion of the net pension liability was based on the ratio of the Commission’s contributions as an individual employer to total contributions to the PERS during the years ended June 30, 2015 and 2014. At June 30, 2015 the Commission’s proportion was .0400999473%, which was a decrease of .003096963% from the previous year. At June 30, 2016, the Commission reported deferred outflows of pension resources of $966,704 from changes in assumptions and $214,747 of differences between expected and actual experience that will be amortized over 6.44 years. Deferred inflows of $144,729 and $779,631 were reported as the net difference between actual and projected investment earnings, and changes in proportion respectively, and will be amortized over 5 and 6.44 years respectively. For the fiscal year ending June 30, 2016, the Commission recognized pension expense of $421,365.

Page 36


JUNE 30, 2016

NOTE 7: EMPLOYEE RETIREMENT PLAN (CONTINUED) Actuarial Assumptions The total pension liability for the June 30, 2016 measurement was determined by an actuarial valuation as of July 1, 2015, which was rolled forward to June 30, 2016. The total pension liability for the June 30, 2016 measurement date was determined by an actuarial valuation as of July 1, 2015. This actuarial valuation used the following actuarial assumptions, applied to all periods in the measurement: Inflation Rate 3.04%

Salary increases: 2012-2021 2.15-4.40% based on age Thereafter 3.15-5.40% based on age Investment rate of return 7.90% Mortality rates were based on the RP-2000 Combined Health Male and Female Mortality Tables (setback 1 year for females) with adjustments for mortality improvements from the base year of 2012 based on Projection Scale AA. The actuarial assumptions used in the July 1, 2015 valuation were based on the results of an actuarial experience study for the period July 1, 2008 to June 30, 2011. Long-Term Expected Rate of Return In accordance with the New Jersey State statute, the long-term expected rate of return on plan investments is determined by the State Treasurer, after consultation with the NJ Directors of the Division of Investments and NJ Division of Pensions and Benefits, the board of trustees and the actuaries. Best estimates of arithmetic real rates of return for each major asset class included in PERS’s target asset allocation as of June 30, 2016 are summarized in the following table:

Asset Class Target Allocation

Long-Term

Expected Real

Rate of Return

Cash 5.00% 1.04%

US. Treasuries 1.75% 1.64%

Investment Grade Credit 10.00% 1.79%

Mortgages 2.10% 1.62%

High Yield Bonds 2.00% 4.03%

Inflation-Indexed Bonds 1.50% 3.25%

Broad US Equities 27.25% 8.52%

Developed Foreign Countries 12.00% 6.88%

Emerging Market Equities 6.40% 10.00%

Private Equity 9.25% 12.41%

Hedge Funds/Absolute Return 12.00% 4.72%

Real Estate (Property) 2.00% 6.83%

Commodities 1.00% 5.32%

Global Debt ex US 3.50% -0.40%

REIT 4.25% 5.12%

Page 37


JUNE 30, 2016

NOTE 7: EMPLOYEE RETIREMENT PLAN (CONTINUED)

Discount Rate The discount rate used to measure the total pension liability was 4.90% and 5.39% as of June 30, 2015 and 2014 respectively. This single blended discount rate was based on the long-term expected rate of return on pension plan investments of 7.9%, and a municipal bond rate of 3.80% and 4.29% as of June 30, 2015 and 2014 respectively, based on the Bond Buyer Go 20-Bond Municipal Bond Index which includes tax-exempt general obligation municipal bonds with an average rating of AA/Aa of higher. The projection of cash flows used to determine the discount rate assumed that contributions from plan members will be made at the current member contribution rates and that contributions from employers will be made based on the average of the last five years of contributions made in relation to the last five years of recommended contributions. Based on these assumptions, the plan’s fiduciary net position was projected to be available to make future benefit payments through 2033. Therefore the long-term expected rate of return on plan investments was applied to projected benefit payments through 2033, and the municipal bond rate was applied to projected benefit payments after that date in determining the total pension liability. Sensitivity of the Collective Net Pension Liability to Changes in the Discount Rate The following represents the Commission’s pro-rata share of the net pension liability as of June 30, 2015 and 2014 respectively, calculated using the discount rate described above as well as what the pro-rata share of the net pension liability would be if it was calculated using a discount rate that is 1 percentage point lower, or 1 percentage point higher than the current rate:

At 1% decrease

(3.90%)

At Current

Discount Rate

(4.90%)

At 1% Increase

(5.90%)

June 30, 2015 8,911,619$ 9,001,635$ 9,091,651$

June 30, 2014 10,161,042$ 8,076,921$ 6,326,790$

NOTE 8: RETIREMENT HEALTH CARE BENEFITS

In addition to the pension benefits described in Note 7, the Commission provides retirement health care benefits in accordance with its policies and procedures to all employees with 25 or more years of service in PERS who retire from the Commission, employees who attain the age of 62 with 15 years of service and employees who retire on disability pensions.. On July 20, 2005, the Commission adopted provisions of N.J.S.A.52:14-17.38 (Resolution 2005-14) under which public employers may agree to pay for State Health Benefit Programs coverage of certain retirees. Consistent with this provision, the Commission established classes of employees whose benefits will vary based on date of hire and years of credited service in PERS, as well as with the Commission. The adoption of these new provisions will have no impact on the benefits provided to retirees currently receiving said benefits or employees who earned benefits as provided for under the former rules prior to January 1, 2006.

On June 28, 2011, New Jersey Chapter 78, P.L. 2011 became effective. The law had no material effect on retirement health care benefits in the current year but impacted subsequent years, requiring employees to fund a portion of their health insurance premiums.

Page 38


JUNE 30, 2016

NOTE 8: RETIREMENT HEALTH CARE BENEFITS (CONTINUED) In August 2004, the Governmental Accounting Standards Board (GASB) issued Statement No. 45 (GASB 45) requiring full disclosure of present and future costs relating to other post-employment benefits (OPEB) in the Commission’s financial statements starting with the fiscal year ending June 30, 2010. The retirement health care benefits the Commission provides are within the scope of GASB 45.

In July 2008 the Commission adopted a resolution for the minutes authorizing the procurement of actuarial services for the purpose of evaluating the cost of retirement health benefits of present and future retirees. Brown & Brown Consulting was hired to perform these services and in September 2008, issued the first actuarial valuation for the Commission’s retiree health benefits program.

In 2009, the Commission opted for a funded plan and, as required, established an irrevocable trust to receive contributions to fund actuarially determined liabilities.

On October 22, 2009 the Commission adopted resolution 2009-9, authorizing the creation of an IRC Section 115 integral part trust and the utilization of an employer savings and investment program offered by ICMA Retirement Corporation. Also on October 22, 2009 the Commission adopted resolution 2009-10 to amend the Commission’s investment policy to allow investment in an integral part trust for the exclusive purpose of funding post-employment health benefits.

On November 30, 2009 The Delaware River Basin Commission Integral Part Trust was established with ICMA Retirement Corporation. The following table shows the activity in the Trust since FY 2010:

Fiscal Year Contribution Outlays ARC Totals

2010 449,000$ 277,468$ (566,000)$ 160,468$

2011 358,303 270,199 (566,000) 62,502

2012 343,029 307,741 (566,000) 84,770

2013 - 324,671 (607,034) (282,363)

2014 280,569 309,245 (606,918) (17,104)

2015 251,000 355,658 (606,918) (260)

2016 205,000 362,025 (566,806) 219

8,232$ OPEB Asset at 6/30/2016

On June 30, 2015 the Integral Part Trust had assets valued at $2,155,371. The Commission provides eligible retirees with medical and prescription drug coverage paid by the employer and reimburses eligible retirees for Medicare Part B premiums. GASB 45 requires financial statement recognition of the cost of these benefits when earned by employees rather than when paid out. Employers are required to measure and disclose the annual OPEB cost based upon the employers annual required contribution (ARC). The ARC is the employer’s periodic annual contribution calculated in accordance with GASB 45 parameters. The ARC includes the normal cost for the year plus amortization, not to exceed 30 years, of the total unfunded actuarial accrued liabilities.

Page 39


JUNE 30, 2016

NOTE 8: RETIREMENT HEALTH CARE BENEFITS (CONTINUED) The Commission’s current actuarial valuation, issued by Brown & Brown in September 2015, concludes that as of July 1, 2015 the Commission’s unfunded actuarial accrued liability is $4,798,519. The resulting annual required contribution (ARC) required by the Commission is $566,806. The calculated ARC contains normal cost and amortization amounts as follows:

Normal Cost 180,111$

Amortization Amount 386,695

Annual Required Contribution 566,806$

Actuarial Assumptions and Methods Used in the July 1, 2015 Valuation

Economic Assumptions: Discount Rate 7% Health Care Cost Trend Rates

Year

Pre-65 Medical and

Prescription Drugs

Post-65 Medical and

Prescription Drugs and

Medicare Part B

2015 7.50% 5.00%

2016 7.00% 5.00%

2017 6.50% 5.00%

2018 6.00% 5.00%

2019 5.50% 5.00%

2020 & Later 5.00% 5.00%

Salary Increases 3% Social Security Taxable Wage Base 3% Consumer Price Index (inflation) 3%

Benefit Assumptions: Future retirees are assumed to remain in the same medical plan they were covered under while active. The Per Capita claims cost is based on retiree premiums in effect for the valuation year projected with a medical trend inflation rate of 3% to the valuation date.

Page 40


JUNE 30, 2016

NOTE 8: RETIREMENT HEALTH CARE BENEFITS (CONTINUED)

Demographic Assumptions: Mortality: Sex-distinct RP-2014 Employees and Healthy Annuitant Tables (headcount-weighted) and projected with scale MP-2014. Retirement Rates: Earlier of (i) age 65 with completion of 15 years of Commission service, or (ii) age 62 with completion of 10 years of Commission service with 25 years of PERS service. Withdrawal: Turnover rates vary by age. Illustrative annual rates per 1000 are as follows:

Years of Service Rate

1 250

2 200

3 150

4 100

Age Rate

5 or more 25 52.7

5 or more 30 48.3

5 or more 35 44.7

5 or more 40 38.4

5 or more 45 32.1

5 or more 50 15.2

5 or more 55 0

5 or more 60 0

Participation Rate: 100% of future retirees. Spousal/Dependent Coverage: Future retirees will have spousal/dependent coverage upon retirement as they currently have. Current retiree spousal/dependent coverage information and spousal dates of births were provided by the Commission. Expenses: Administrative expenses for reinsurance and medical and prescription drug costs are included in the above claims costs. Decrement Timing: Mid-year.

Actuarial Cost Method: The Projected Unit Credit method was used to determine the plan’s cost. The unfunded actuarial accrued liability is amortized as a level dollar amount using an open period of 30 years

Page 41 DELAWARE RIVER BASIN COMMISSION

NOTES TO FINANCIAL STATEMENTS (CONTINUED) JUNE 30, 2016

NOTE 9: OPERATING TRANSFERS

Interfund Transfers are executed as a result of the requirements for the General Fund to match a portion of the expenses of the other funds. Interfund operating transfers are as follows:

Transfers From Transfers To

Other Funds Other Funds

Governmental Funds:

General Fund 2,166,118$ 564,626$

Special Projects Fund 627,873 326,471

Total Governmental Funds 2,793,991 891,097

Enterprise Funds:

Water Supply Storage Facilities Fund - 1,902,894

Total 2,793,991$ 2,793,991$

NOTE 10: EARLY RETIREMENT PROGRAM

On September 25, 1991, the Delaware River Basin Commission adopted Resolution 91-7. This resolution authorized the Commission to participate in the State of New Jersey Early Retirement Incentive Program. As of June 30, 2016, certain employees have exercised their option to retire utilizing the Early Retirement Incentive Program. Based on information provided to the Commission, the present value of the estimated additional pension liability for these employees totals $388,099 at June 30, 2016, of which $291,178 has been recorded in the General Fund, and $96,921 has been recorded in the Proprietary Fund. This additional liability is to be paid over a period of 26 years. Payments made for this program during the year ended June 30, 2016, were $85,483.

NOTE 11: FEDERAL CONTRIBUTION

The Energy and Water Appropriations Bill (P.L. 104-206) eliminated federal funding for the Delaware River Basin Commission for the federal fiscal year 1997 (October 1, 1997 through September 1, 1998). The federal government has not provided a contribution since 2009. The Commission continues its efforts to restore federal funding.

NOTE 12: LITIGATION

The Commission is subject to litigation and threats of litigation arising out of its activities. In June of 2013 the Commission received notice from landowners asserting that they have been financially harmed as a result of the Commission’s imposition of a moratorium on its consideration of natural gas well projects in shale formations in the Basin. The moratorium continues pending completion of natural gas rulemaking. The Commission believes the landowners’ assertions are without merit, and if litigation is commenced, the Commission will vigorously defend. The amount or range of reasonably possible loss resulting from such litigation, if and when it is commenced, cannot reasonable be estimated at this time.

NOTE 13: SUBSEQUENT EVENTS

The Commission has evaluated subsequent events occurring after June 30, 2016 through the date of January 2, 2017, which is the date the financial statements were available to be issued. Based on this evaluation, the Commission has determined that no subsequent events have occurred which require disclosures in the financial statements.

R E Q U I R E D

S U P P L E M E N T A L

I N F O R M A T I O N

Page 43

DELAWARE RIVER BASIN COMMISSION GENERAL FUND

SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL (GAAP BASIS)

YEARS ENDED JUNE 30, 2016 AND 2015

Variance Variance

Final To Final To

Actual Actual

Original Favorable Original Favorable

Budget Actual (Unfavorable) Budget Actual (Unfavorable)

Revenues:


State of Delaware 447,000$ 447,000$ -$ 447,000$ 447,000$ -$

State of New Jersey 693,000 693,000 - 693,000 693,000 -

State of New York 359,500 359,500 - 359,500 359,500 -

Commonwealth of Pennsylvania 750,000 434,000 (316,000) 434,000 434,000 -

United States 715,000 - (715,000) 715,000 - (715,000)

Sale of Publications 2,700 2,707 7 2,700 2,778 78

Project Review Fees 400,000 839,249 439,249 400,000 598,629 198,629

Interest Income 2,500 13,975 11,475 2,500 - (2,500)

Fines, Assessments and Other Income 135,700 235,981 100,281 132,300 197,617 65,317

Total Revenues 3,505,400 3,025,412 (479,988) 3,186,000 2,732,524 (453,476)

2016 2015

Page 44

DELAWARE RIVER BASIN COMMISSION GENERAL FUND

SCHEDULE OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCES BUDGET AND ACTUAL (GAAP BASIS)(CONTINUED)

YEARS ENDED JUNE 30, 2016 AND 2015

Variance Variance

Final To Final To

Actual Actual

Original Favorable Original Favorable

Budget Actual (Unfavorable) Budget Actual (Unfavorable)

Expenditures

Personal Services 2,707,300$ 2,487,892$ 219,408$ 2,711,400$ 2,464,300$ 247,100$

Special and Contractual Services 219,200 123,266 95,934 219,200 137,938 81,262

Other Services 158,000 168,158 (10,158) 158,000 165,686 (7,686)

Supplies and Other Materials 70,000 37,262 32,738 70,000 32,191 37,809

Buildings and Grounds 342,500 191,701 150,799 176,500 202,315 (25,815)

Communications 24,000 27,383 (3,383) 24,000 24,590 (590)

Travel 42,000 52,912 (10,912) 42,000 56,413 (14,413)

Maintenance, Replacements, Acquisitions and Rentals 140,900 153,302 (12,402) 47,800 97,669 (49,869)

Fringe Benefits and Other Contributions 1,608,200 1,439,677 168,523 1,645,600 1,452,802 192,798

Total Expenditures 5,312,100 4,681,553 630,547 5,094,500 4,633,904 460,596

Excess of Revenues Over (Under) Expenditures (1,806,700) (1,656,141) 150,559 (1,908,500) (1,901,380) 7,120

Other Financing Sources (Uses)

Operating Transfers In 2,169,700 2,166,118 (3,582) 2,086,400 1,926,137 (160,263)

Operating Transfers Out (363,000) (564,626) (201,626) (363,000) (265,420) 97,580

Total Other Financing Sources (Uses) 1,806,700 1,601,492 (205,208) 1,723,400 1,660,717 (62,683)

Net Change in Fund Balances - (54,649) (54,649) (185,100) (240,663) (55,563)

Fund Balances-Beginning of Year 4,512,963 4,512,963 - 4,753,626 4,753,626 -

Fund Balances-End of Year 4,512,963$ 4,458,314$ (54,649)$ 4,568,526$ 4,512,963$ (55,563)$

2016 2015

Page 45

DELAWARE RIVER BASIN COMMISSION SCHEDULE OF COMMISSION’S PROPORTIONATE SHARE OF THE NET PENSION LIABILITY

STATE OF NEW JERSEY PUBLIC EMPLOYEES’ RETIREMENT SYSTEM

Last 10 Fiscal Years*

(Dollar Amounts in Thousands)

2016 2015

Commission's proportion of the net pension liability 0.0400999473% 0.0431396436%

Commission's proportionate share of the net pension

liability 9,001,635$ 8,076,921$

Commission's covered-employee payroll 2,809,302$ 2,918,162$

Commission's proportionate share of the net pension

liability as a percentage of its covered-employee payroll 320.42% 276.78%

Plan fiduciary net position as a percentage of the total

pension liability .

47.93% 52.08%

* The amounts presented for the fiscal year were determined as of the calendar year-end (12/31) that occurred within the fiscal year. The Commission adopted GASB 68 on a prospective basis in fiscal year 2015; therefore only two year is presented in the above schedule. The above amounts were taken from the State of New Jersey Public Employees Retirement System Schedules of

Page 46

DELWARE RIVER BASIN COMMISSION SCHEDULE OF COMMISSION’S CONTRIBUTIONS

STATE OF NEW JERSEY PUBLIC EMPLOYEES’ RETIREMENT SYSTEM

Last 10 Fiscal Years* (Dollar Amounts in Thousands)

2016 2015

Contractually required contribution 344,752$ 355,637$

Contributions in relation to the

contracturally required contribution (344,752) (355,637)

Contribution deficiency (excess) -$ -$

Commission's covered-employee payroll 2,809,302 2,918,162

Contributions as a percentage of covered-

employee payroll 12.27% 12.19%

* The Commission adopted GASB 68 on a prospective basis in fiscal year 2015; therefore only two year is presented in the above schedule.

S T AT I S T I C AL S E C T I O N U N AU D I T E D

Page 48

DELAWARE RIVER BASIN COMMISSION NET POSITION (DEFICIT) BY COMPONENT

LAST SIX YEARS ENDING JUNE 30 (ACCRUAL BASIS OF ACOUNTING)

UNAUDITED

2016 2015 2014 2013 2012 2011

Government-wide Activities

Invested in Capital Assets,

Net of Related Debt 1,297,686$ 1,225,993$ 1,296,488$ 1,243,769$ 1,235,557$ 1,277,349$

Restricted 8,232 8,013 8,272 25,377 - -

Unrestricted (4,894,193) (4,812,105) 4,073,604 4,199,883 3,605,541 4,008,618

Total Governmental Activities

Net Position (3,588,275)$ (3,578,099)$ 5,378,364$ 5,469,029$ 4,841,098$ 5,285,967$

Business-Type Activities


Net of Related Debt (6,255,056)$ (6,289,341)$ (6,292,626)$ (6,144,978)$ (6,326,483)$ (6,262,062)$

Unrestricted 24,243,915 23,655,228 22,923,355 21,264,716 21,093,887 20,110,038

Total Business-Type Activities

Net Position 17,988,859$ 17,365,887$ 16,630,729$ 15,119,738$ 14,767,404$ 13,847,976$

Commission-Wide


Net of Related Debt (4,957,370)$ (5,063,348)$ (4,996,138)$ (4,901,209)$ (5,090,926)$ (4,984,713)$

Restricted 8,232 8,013 8,272 25,377

Unrestricted 19,349,722 18,843,123 26,996,959 25,464,599 24,699,428 24,118,656

Total Commission

Net Position 14,400,584$ 13,787,788$ 22,009,093$ 20,588,767$ 19,608,502$ 19,133,943$

Page 49

DELAWARE RIVER BASIN COMMISSION CHANGES IN NET POSITION (ACCRUAL BASIS OF ACCOUNTING)

LAST SIX FISCAL YEARS – UNAUDITED

2016 2015 2014 2013 2012 2011

Expenses:

Primary Government:

General Government 2,585,242$ 2,631,032$ 2,695,492$ 2,737,337$ 2,894,334$ 2,868,603$

Water Resource Management 1,159,005 608,925 628,351 555,555 532,990 695,950

Water Resource Operations 477,538 1,025,312 894,246 1,047,420 1,112,246 1,065,528

Science and Water Quality Management 462,150 401,471 326,237 450,034 649,476 676,179

Special Projects 1,731,624 1,738,325 1,987,066 2,068,231 1,538,918 1,610,687

Total Government Activities 6,415,559 6,405,065 6,531,392 6,858,577 6,727,964 6,916,947


Water Supply Storage Facilities 1,720,829 1,304,051 1,441,325 1,493,536 1,337,685 1,469,744

Total Business-Type Activities 1,720,829 1,304,051 1,441,325 1,493,536 1,337,685 1,469,744

Total Primary Government 8,136,388$ 7,709,116$ 7,972,717$ 8,352,113$ 8,065,649$ 8,386,691$

Program Revenues:

Government Activities:


Project Review Fees -$ 598,629$ 491,844$ 780,281$ 954,476$ 448,296$

Operating Grants and Contributions 1,477,078 1,479,024 1,595,706 2,124,299 1,165,723 1,358,461

Total Government Activities Program

Revenue 1,477,078 2,077,653 2,087,550 2,904,580 2,120,199 1,806,757



Water Supply Storage Facilities 3,482,420 3,557,378 3,188,909 3,314,826 3,417,057 2,860,915

Total Business-Type Activities Program

Revenue 3,482,420 3,557,378 3,188,909 3,314,826 3,417,057 2,860,915

Total Commission Program Revenues 4,959,498$ 5,635,031$ 5,276,459$ 6,219,406$ 5,537,256$ 4,667,672$

Fiscal Year Ended June 30,

Page 50

DELAWARE RIVER BASIN COMMISSION CHANGES IN NET POSITION (ACCRUAL BASIS OF ACCOUNTING)(CONTINUED)

LAST SIX FISCAL YEARS – UNAUDITED

2016 2015 2014 2013 2012 2011

Net (Expense)/Revenue:

Governmental Activities (4,099,232)$ (4,327,412)$ (4,443,842)$ (3,953,997)$ (4,607,765)$ (5,110,190)$

Business-Type Activities 1,761,591 2,253,327 1,747,584 1,821,290 2,079,372 1,391,171

Total Commission-Wide Net Expense (2,337,641)$ (2,074,085)$ (2,696,258)$ (2,132,707)$ (2,528,393)$ (3,719,019)$

General Revenues and Other Changes in Net Position:


Grants and Contributions Net

Restricted to Special Programs 1,933,500 1,933,500 2,384,350 2,534,350 2,188,000 2,283,505

Investment Earnings 13,975 - - - 1,409 108,599

Miscellaneous Income 238,687 186,306 102,893 32,985 39,059 76,188

Transfers 1,902,894 1,926,470 1,865,934 2,104,975 1,934,429 1,713,692

Total Governmental Activities 4,089,056 4,046,276 4,353,177 4,672,310 4,162,897 4,181,984


Investment Earnings 764,275 408,301 1,629,341 636,019 774,484 1,445,172

Transfers (1,902,894) (1,926,470) (1,865,934) (2,104,975) (1,934,429) (1,713,692)

Total Business-Type Activities (1,138,619) (1,518,169) (236,593) (1,468,956) (1,159,945) (268,520)

Total Commission-Wide 2,950,437$ 2,528,107$ 4,116,584$ 3,203,354$ 3,002,952$ 3,913,464$

Changes in Net Assets:

Governmental Activities (10,176)$ (281,136)$ (90,665)$ 718,313$ (444,868)$ (928,206)$

Cumulative Changes - (8,675,327) - - - -

Subtotal Governmental Activities (10,176)$ (8,956,463)$ (90,665)$ 718,313$ (444,868)$ (928,206)$

Business-Type Activities 622,972 735,158 1,510,991 352,334 919,427 1,122,651

Total Commission 612,796$ (8,221,305)$ 1,420,326$ 1,070,647$ 474,559$ 194,445$


Page 51

DELAWARE RIVER BASIN COMMISSION FUND BALANCES GOVERNMENTAL FUNDS

(MODIFIED ACCRUAL BASIS OF ACCOUNTING) LAST SIX FISCAL YEARS – UNAUDITED

2016 2015 2014 2013 2012 2011

General Fund:

Committed/Assigned 308,232$ 308,013$ 308,272$ 325,377$ 300,000$ 300,000$

Unassigned 4,150,082 4,204,950 4,445,354 4,622,306 3,770,871 4,191,649

Total General Fund 4,458,314$ 4,512,963$ 4,753,626$ 4,947,683$ 4,070,871$ 4,491,649$

All Other Governmental Funds:

Unreserved, Reported In:

Special Revenue Fund -$ -$ -$ 45,576$ 346,785$ 354,472$

Total All Other Governmental Funds -$ -$ -$ 45,576$ 346,785$ 354,472$

Fiscal Year Ending June 30,

Page 52

DELAWARE RIVER BASIN COMMISSION CHANGES IN FUND BALANCES - GOVERNMENTAL FUNDS

(MODIFIED ACCRUAL BASIS OF ACCOUNTING) LAST TEN YEARS – UNAUDITED

2016 2015 2014 2013 2012 2011 2010 2009 2008 2007

Revenues:


State of Delaware 447,000$ 447,000$ 468,456$ 520,830$ 465,593$ 127,000$ 447,000$ 496,995$ 491,331$ 438,067$

State Of New Jersey 694,505 698,113 704,926 893,000 903,500 893,000 893,000 941,305 1,043,702 999,879

State of New York 359,500 359,500 246,000 246,000 365,500 370,505 472,800 638,891 696,009 611,520

Commonwealth of Pennsylvania 548,320 549,780 1,141,837 1,105,089 686,411 1,075,016 1,194,567 1,396,978 1,389,812 1,255,610

United States 869,793 859,461 681,780 984,514 692,322 887,067 1,177,445 1,247,241 1,089,108 673,229

Water Pollution Control Grant - - - - - - - - - 650,890

Sale of Publications 2,707 2,778 2,444 2,775 3,450 2,604 3,797 3,850 4,410 3,700

Project Review Fees 839,249 598,629 491,844 780,282 954,518 448,296 876,021 366,912 282,293 479,565

Overhead Reimbursement - - - - - - - - - -

Investment Income 13,975 - - 59 1,366 108,599 4,989 98,997 281,456 350,683

Fines, Assessments and Other Income 727,441 696,287 837,510 939,369 293,152 362,961 306,574 343,646 430,010 504,913

Total Revenues 4,502,490 4,211,548 4,574,797 5,471,918 4,365,812 4,275,048 5,376,193 5,534,815 5,708,131 5,968,056

Expenditures:

Personal Services 2,961,430 3,011,603 3,133,111 3,185,201 3,254,446 3,200,330 3,164,452 3,073,105 2,989,978 2,867,064

Special and contractual Services 1,023,993 955,814 1,087,400 1,324,809 1,176,378 1,258,916 1,299,652 1,296,004 2,030,419 1,927,198

Other Services 168,348 165,871 153,532 139,841 140,884 169,136 135,232 142,164 146,511 155,277

Supplies and Materials 58,183 47,237 67,254 64,757 55,422 57,534 64,701 65,482 65,046 88,058

Buildings and Grounds 236,561 202,329 271,377 250,725 186,302 175,127 191,007 224,765 330,318 172,807

Communications 34,748 26,274 27,439 23,755 20,134 26,147 34,047 40,325 45,724 50,352

Travel 59,165 61,060 62,849 32,529 46,018 66,133 50,258 46,794 62,724 62,186

Maintenance, Replacements

Acquisitions and Rentals 199,693 145,549 109,320 100,683 139,677 81,939 116,964 167,845 201,450 304,166

Fringe Benefits and Other Contributions 1,717,912 1,762,944 1,768,082 1,788,616 1,709,443 1,684,286 1,561,351 1,148,468 1,063,827 937,374

Total Expenditures 6,460,033 6,378,681 6,680,364 6,910,916 6,728,704 6,719,548 6,617,664 6,204,952 6,935,997 6,564,482

Excess/(Deficiency) of Revenues

Over/(Under) Expenditures (1,957,543) (2,167,133) (2,105,567) (1,438,998) (2,362,892) (2,444,500) (1,241,471) (670,137) (1,227,856) (596,426)

Other Financing Sources/(Uses):

Operating Transfers In 2,793,991 2,262,609 2,619,017 2,952,197 2,384,568 2,215,026 2,323,696 1,425,080 1,863,910 1,370,076

Operating Transfer (Out) (891,097) (336,139) (753,083) (847,222) (450,138) (501,334) (593,537) (617,240) (861,580) (441,954)

Total Other Financing Sources and Uses 1,902,894 1,926,470 1,865,934 2,104,975 1,934,430 1,713,692 1,730,159 807,840 1,002,330 928,122

Net Change in Fund Balances (54,649)$ (240,663)$ (239,633)$ 665,977$ (428,462)$ (730,808)$ 488,688$ 137,703$ (225,526)$ 331,696$


Page 53

DELAWARE RIVER BASIN COMMISSION OUTSTANDING DEBT BY TYPE

LAST TEN YEARS – UNAUDITED

Business-Type Government

Activities Fund Type

Fiscal Year Ended Due to U.S. Army

June 30, Corps of Engineers Capital Lease Total

2016 10,583,426$ 40,094$ 10,623,520$

2015 11,065,397 51,183 11,116,580

2014 11,531,473 - 11,531,473

2013 11,810,071 - 11,810,071

2012 12,418,024 - 12,418,024

2011 12,678,838 - 12,678,838

2010 13,247,073 - 13,247,073

2009 13,491,240 12,456 13,503,696

2008 14,022,355 22,513 14,044,868

2007 14,250,939 46,591 14,297,530

SUPPLEMENTAL SCHEDULES


SCHEDULE OF ACTIVE PROJECTS – UNAUDITED THROUGH JUNE 30, 2016

Groundwater Port Jarvis Nutrient

FFMP Pennsylvania Ice Flow NG Software Monitoring

Feasibility USGS OASIS Data Protected Maintenance Builidng Tool and Baseline of

Study Monitors Model Tracking Area Project Improvements Process Monitoring Discharges

282 310 312A 314A 315 320 324A 326B 326C 327A Page Total

Cumulative Expenditures from Date

of Inception Through 6/30/2015 -$ 3,786,988$ 135,582$ 954$ 6,400,357$ 3,729$ (28,131)$ 364,968$ 82,500$ - 10,746,947$

Current Fiscal Year

Expenditures and Encumbrances:

Personal Services 190 - 2,071 - 48,254 - - 29,639 561 - 80,715

Special and Contractual Services - 256,344 - - - - 5,714 112,625 - 28,045 402,728

Supplies, Materials and Equipment - - - - - - 4,106 3,000 - 339 7,445

Travel and Communications - - - - 215 - - 13 - - 228

Fringe Benefits 112 - 1,220 - 27,779 - - 17,455 330 - 46,896

Transfers and Refunds (302) (63,247) (3,291) - 37,773 - (85,149) 19,573 (891) - (95,534)

Total Current Fiscal Year - 193,097 - - 114,021 - (75,329) 182,305 - 28,384 442,478

Total Expenditures from Date of

Inception Through June 30, 2016 - 3,980,085 135,582 954 6,514,378 3,729 (103,460) 547,273 82,500 28,384 11,189,425

Capital Expenditures - - - 10,570 12,720 - 103,460 - - - 126,750

Total Funding Awarded for Project - 4,040,528 135,582 75,000 6,536,020 97,155 - 649,000 82,500 44,390 11,660,175

Funding Available to Complete Project -$ 60,443$ -$ 63,476$ 8,922$ 93,426$ -$ 101,727$ -$ 16,006$ 344,000$


SCHEDULE OF ACTIVE PROJECTS – UNAUDITED THROUGH JUNE 30, 2016

(CONTINUED)

DuPont Early Natural PPL Sec. 106 Water Lower Delaware

Exelon 59 Edgemoor Warning Gas PA Water Ash Spill Pollution Model Point Flood

Degree Lim. Discharge System Monitoring Planning Fly Ash Settlement Control Grant Discharge Study Outreach Totals

329A 329C 343 350A 353 360 361 362 364 375

Cumulative Expenditures from Date

of Inception Through 6/30/2015 26,305$ 8,110$ 630,307$ 56,789$ 935,061$ -$ -$ 1,135,447$ 130,000$ 17,034$ 13,686,000$

Current Fiscal Year:

Expenditures and Encumbrances:

Personal Services 1,070 - - - 126 65 704 390,001 - 857 473,538

Special and Contractual Services - - 62,533 14,473 - - - 420,994 - - 900,728

Supplies, Materials and Equipment - - - - - - - 19,056 - - 26,501

Travel and Communications - - - - - - - 13,392 - - 13,620

Fringe Benefits 630 - - - 74 39 415 229,677 - 505 278,236

Transfers and Refunds (1,700) - - - 99 (104) 2,820 (213,857) - 143 (308,133)

Total Current Fiscal Year - - 62,533 14,473 299 - 3,939 859,263 - 1,505 1,384,490

Total Expenditures from Date of

Inception Through June 30, 2016 26,305 8,110 692,840 71,262 935,360 - 3,939 1,994,710 130,000 18,539 15,070,490

Capital Expenditures - - - - 5,799 - - 46,684 - - 179,233

Total Funding Awarded for Project 26,305 8,110 703,291 150,000 1,100,000 - 952,150 2,356,613 130,000 39,995 17,126,639

Funding Available to Complete Project -$ -$ 10,451$ 78,738$ 158,841$ -$ 948,211$ 315,219$ -$ 21,456$ 1,876,916$


GENERAL FUND EXPENDITURES – BY CATEGORY AND OBJECT UNAUDITED

YEARS ENDED JUNE 30, 2016

2016 2015

Personnel Services 2,487,892$ 2,485,833$

Special and Contractual Services:

Auditing 15,725 16,180

Computer and Financial 15,964 17,412

All Other Special and Contractual Services 91,577 104,346

Total Special and Contractual Services 123,266 137,938

Other Services:

Insurance 121,884 121,787

Advertising 17,878 16,028

Memberships 17,361 15,544

All Other 11,035 12,327

Total Other Services 168,158 165,686

Supplies and Materials:

Vehicular 5,950 6,793

Office 29,763 22,436

Library 1,549 2,962

Total Supplies and Materials 37,262 32,191

Buildings and Grounds 191,701 202,315

Communications:

Postage 3,742 4,677

Telephone and Other 23,641 19,913

Total Communications 27,383 24,590

Travel:

Travel 20,544 27,132

Commission Meeting Expense 32,368 29,281

Total Travel 52,912 56,413

Maintenance, Replacements, Acquisitions and Rentals:

Office Equipment 7,606 13,426

Vehicular Equipment 6,949 12,079

Computers 14,212 20,607

Office Equipment Rental - 406

Other 12,173 -

Depreciation 112,362 114,011

Total Maintenance, Replacements, Acquisitions and Rentals 153,302 160,529

Fringe Benefits and Other Contributions:

Employees' Retirement 383,369 316,264

Social Security 183,624 177,334

Health and Dental Benefits 855,145 890,855

Unemployment Compensation 7,162 7,661

Long-Term Disability 8,981 9,131

Other Fringes 1,396 -

Total Fringe Benefits and Other Contributions 1,439,677 1,401,246

Total General Fund Expenditures 4,681,553$ 4,666,741$


CHANGES IN SPECIAL PROJECTS ADVANCE/(RECEIVABLE) BALANCE – BY PROJECT - UNAUDITED


Balance Cash Balance

Advances: Project July 1, 2015 Receipts Transfers Expenditures June 30, 2016

310 USGS Monitors 60,045$ 193,495$ 63,247$ (256,344)$ 60,443$

314A Data Tracking - Haas Trust 63,476 - - - 63,476

315 Groundwater - PA 61,943 61,000 (37,773) (76,248) 8,922

320 Upper Delaware Ice Jam 93,194 232 - - 93,426

322 Flow and Temp. Modeling 16,622 - - - 16,622

326B NG Software Tool, Planning 284,033 - (19,573) (162,732) 101,728

326C Baselie Monitoring - - 892 (892) -

327A Nurtrient Monitoring Of Discharges - 44,390 - (28,384) 16,006

336 Flexible Flow Management Plan 15,593 - - - 15,593

343 Early Warning System - 72,984 - (62,533) 10,451

350A NG Monitoring Haas rust 93,211 - - (14,473) 78,738

353 PA Water Planning 159,140 - (99) (200) 158,841

361 PPL Ash Spill 952,150 (2,820) (1,119) 948,211

372 William Penn Foundation 3,000 - - - 3,000

373 William Penn Fd. - PCBs 3,843 - - - 3,843 384 Nutrient Expert Panel 22,733 - - - 22,733

Total Advances 876,833$ 1,324,251$ 3,874$ (602,925)$ 1,602,033$

Accounts Receivable:

362 Water Polution Coltrol (177,989)$ 709,000$ 213,857$ (1,083,650)$ (338,782)$

Total Accounts Receivable (177,989)$ 709,000$ 213,857$ (1,083,650)$ (338,782)$

Page 59

DELAWARE RIVER BASIN COMMISSION SCHEDULE OF EXPENDITURES OF FEDERAL AND STATE AWARDS

YEAR ENDING JUNE 30, 2016

Federal DRBC Accrued (Deferred) Amount Received (Accrued) Deferred Subrecipient

Federal Grantor/Program Title CFDA # Project # Grant Period Beginning of Year for Year Expenditures End of Year Awards

Federal Awards:

Direct Programs:

U.S. Environmental Protection Agency:

Water Polution Control Grant 66.419 362-CY14 1/1/2014-12/31/2016 177,989$ 709,000$ 869,793$ 338,782$ -$ *

Total Direct Programs 177,989 709,000 869,793 338,782 -

Total Federal Awards 177,989$ 709,000$ 869,793$ 338,782$ -$

*Denotes program audited as major.

See accompanying notes to schedule of expenditures of Federal Awards.

Page 60

DELAWARE RIVER BASIN COMMISSION NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AND STATE AWARDS

JUNE 30, 2016 NOTE 1: GENERAL

The accompanying schedule of expenditures of federal awards presents the activity of all federal award programs of the Delaware River Basin Commission. The Delaware River Basin Commission's reporting entity is defined in Note 1 to the Commission's financial statements. All federal and state awards received directly from federal agencies, as well as federal awards passed through other government agencies, are included on the Schedule of Expenditures of Federal and State Awards.

NOTE 2: BASIS OF ACCOUNTING

The accompanying schedule of expenditures of federal awards is presented using the accrual basis of accounting.

NOTE 3: RELATIONSHIP TO FEDERAL AND STATE FINANCIAL REPORTS

Amounts reported in the accompanying schedules agree with the amounts reported in the related federal and state financial reports.

Page 61

REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN

ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS To the Commissioners Delaware River Basin Commission We have audited, in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States, the financial statements of the Delaware River Basin Commission (the “Commission”), as of and for the year ended June 30, 2016, and the related notes to the financial statements, which collectively comprise Commission’s basic financial statements, and have issued our report thereon dated January 20, 2017. Internal Control Over Financial Reporting In planning and performing our audit of the regulatory basis financial statements, we considered the Commission’s internal control over financial reporting (“internal control”) to determine the audit procedures for that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Commission’s internal control Accordingly, we do not express an opinion on the effectiveness of the Commission’s internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charges with governance. Our consideration of the internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. Compliance and Other Matters As part of obtaining reasonable assurance about whether the Commission’s regulatory basis financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express

Page 62

To the Commissioners Delaware River Basin Commission such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results for that testing, and not to provide an opinion on the effectiveness of the entity’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose.

ZELENKOFSKE AXELROD LLC

Jamison, Pennsylvania January 20, 2017

Page 63

REPORT ON COMPLIANCE FOR EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER

COMPLIANCE REQUIRED BY THE UNIFORM GUIDANCE AND NEW JERSEY OMB CIRCULAR 04-04 To the Commissioners Delaware River Basin Commission Compliance

We have audited the compliance of Delaware River Basin Commission’s (the “Commission”) with the types of compliance requirements described in the OMB Supplement and New Jersey OMB Circular 04-04 Compliance Supplements that could have a direct and material effect on each of the Commission’s major programs for the year ended June 30, 2016. The Commission’s major programs are identified in the summary of auditor’s results section of the accompanying schedule of findings and questioned costs. Management’s Responsibility

Management is responsible for compliance with the requirements of laws, regulations, contracts, and grants applicable to its state programs. Auditor’s Responsibility

Our responsibility is to express and opinion on compliance for each of the Commission’s major programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States, and the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) and New Jersey OMB Circular 04-04, Single Audit Policy for Recipients of Federal Grants, State Grants and State Aid Programs. Those standards and the Uniform Guidance require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the Commission’s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. Opinion on Each Major Program

In our opinion, the Commission complied, in all material respects, with the types of compliance requirements referred to above that are applicable to its major federal program for the year ended June 30, 2016. Report on Internal Control Over Compliance

The management of the Commission is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered the Commission’s internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program in order to determine our auditing procedures for the purpose of expressing our opinion on compliance and to test and report on the internal control over compliance in accordance with the Uniform Guidnace, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance.

Page 64

To the Commissioners Delaware River Basin Commission Accordingly, we do not express an opinion on the effectiveness of the Commission’s internal control over compliance.

A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal or state program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal or state program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charge with governance.

Our consideration of the internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify and deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.

This purpose of this on internal control over compliance is solely to describe the scope of our testing of internal over compliance and the results of that testing based on the requirements of the Uniform Guidance. Accordingly, this report is not suitable for any other purpose.

Jamison, Pennsylvania ZELENKOFSKE AXELROD LLC January 20, 2017

Page 65

DELAWARE RIVER BASIN COMMISSION SCHEDULE OF FINDINGS AND QUESTIONED COSTS

JUNE 30, 2016

Section I - Summary of Auditors’ Results: Financial Statements Type of auditors’ report issued: unmodified Internal control over financial reporting: Material weakness(es) identified? yes X no Reportable condition(s) identified that are not considered to be material weaknesses?

yes X none reported Noncompliance material to financial statements noted? yes X no Federal Awards Internal control over major programs: Material weakness(es) identified? yes X no Reportable condition(s) identified that are not considered to be material weakness(es)?

yes X none reported Type of auditors’ report issued on compliance for major programs: Unmodified Any audit findings disclosed that are required to be reported in accordance with the Uniform Guidance? yes X no Identification of major programs:

CFDA Number Name of Federal Program

66.419 Water Pollution Control – State and Interstate Program Support

Dollar threshold used to distinguish between Type A and Type B programs: $750,000 Auditee qualified as low-risk auditee? X yes no Section II - Financial Statement Findings None. Section III - Federal Award Findings or Questioned Costs None.

Page 66

DELAWARE RIVER BASIN COMMISSION SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS

JUNE 30, 2015

Prior Year Reference Description Current Year Status

None

Documents

FINANCIAL STATEMENTS WITH INDEPENDENT AUDITORS’ … · Adoptions of Governmental Accounting Standards Board Pronouncements As described in Note 1 to the financial statements, for